What is the primary purpose of the $4 billion term loan and $1 billion revolving credit facility?

These facilities are primarily intended to finance the cash consideration for, and fees and expenses related to, the merger between Johnson Controls and Tyco. The revolving credit facility can also be used for general corporate purposes of the Tyco subsidiary.

Who is responsible for repaying these new debt facilities?

The debt is being taken on by Tyco International Holding S.à r.l., an indirect wholly owned subsidiary of Tyco. The facilities are based on the Borrower's properties, assets, and credit, and are not guaranteed or supported by legacy Johnson Controls entities.

Are there any conditions that need to be met for these loans to be funded?

Yes, the funding of the term loan and the ability to borrow under the revolving credit facility are subject to the satisfaction of customary conditions, most notably the consummation of the merger between Johnson Controls and Tyco.

What are the key financial covenants associated with these credit facilities?

Both the term loan and the revolving credit facility require the Borrower (Tyco International Holding S.à r.l.) to maintain a leverage ratio of not more than 3.5 to 1.0, defined as consolidated debt to consolidated EBITDA.

JCI 8-K: Material Agreements & Financial Events

Summary

Johnson Controls International plc (JCI) filed an 8-K on March 15, 2016, detailing the establishment of significant financing facilities to support its pending merger with Tyco International plc. Specifically, Tyco International Holding S.à r.l., an indirect subsidiary of Tyco, secured a $4 billion senior unsecured term loan facility and a $1 billion senior unsecured revolving credit facility. These facilities are crucial for funding the cash consideration and associated costs of the merger, which is structured as Tyco acquiring Johnson Controls with Johnson Controls being the surviving entity. The financing is structured such that the debt obligations reside with the Tyco subsidiary (Borrower) and are secured by its assets and credit, not by the legacy Johnson Controls entities. The term loan has a maturity of 3.5 years and the revolving credit facility matures on August 7, 2020, with an option to increase its size. Both facilities include customary covenants, including a 3.5x leverage ratio requirement for the Borrower, and events of default. The successful consummation of the merger is a key condition for the funding of these loans.

Key Highlights

1Tyco International Holding S.à r.l. secured a $4 billion senior unsecured term loan facility on March 10, 2016, to fund the merger with Johnson Controls.
2A $1 billion senior unsecured revolving credit facility was also established for Tyco International Holding S.à r.l. on March 10, 2016, to be used for general corporate purposes.
3The merger involves Johnson Controls surviving as the entity, with the debt obligations being borne by a Tyco subsidiary, not legacy Johnson Controls assets.
4Both credit facilities are contingent upon the consummation of the merger, meaning the funding is tied to the deal closing.
5The loan facilities are senior unsecured and will bear interest based on LIBOR or an alternate base rate, plus applicable margins tied to the Borrower's leverage ratio.
6Both facilities include standard covenants, such as a maximum leverage ratio of 3.5 to 1.0 for the Borrower, and customary events of default.
7The revolving credit facility can be increased by up to $250 million, bringing the total potential commitment to $1.25 billion.

Johnson Controls International plc 8-K Report, Material Agreement (Mar 16, 2016)

Summary

Key Highlights

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