What is the purpose of this $500 million debt issuance?

Johnson Controls International plc intends to use the net proceeds from this offering for general corporate purposes, which includes the repayment or redemption of near-term indebtedness.

What are the key terms of these new Notes?

The Notes carry a 2.000% interest rate, mature on September 16, 2031, and are unsecured and unsubordinated. Notably, they are sustainability-linked, meaning the interest rate can increase if the company fails to meet specific emissions reduction targets.

What does 'sustainability-linked' mean in this context, and what are the risks if targets aren't met?

Sustainability-linked means the financial terms of the Notes are tied to the achievement of environmental performance targets. In this case, if Johnson Controls does not meet its Scope 1, Scope 2, or Scope 3 emissions targets by a specified date, the annual interest rate on the Notes will increase by up to 25 basis points. This creates a financial incentive for the company to achieve its stated sustainability goals.

How do these Notes rank in terms of priority compared to other debt?

The Notes are unsecured and unsubordinated obligations of the Issuers. They rank senior to any existing or future debt that is expressly subordinated to the Notes and equal to other unsubordinated debt. However, they are effectively junior to any secured indebtedness to the extent of the value of the collateral securing that debt, and structurally junior to any debt issued by JCI's subsidiaries.

JCI 8-K: Material Agreements

01—Abstract

Summary

Summary of the 8-K filed September 16, 2021. Cited figures are marked; the original filing is the authoritative source.

Johnson Controls International plc (JCI) announced the completion of a $500.0 million^a offering of 2.000% Sustainability-Linked Senior Notes due 2031.

The offering, which was executed on September 13, 2021, and completed on September 16, 2021, involves unsecured, unsubordinated debt that ranks senior to existing and future subordinated debt, but is effectively junior to secured indebtedness and structurally junior to subsidiary debt. The company intends to use the net proceeds for general corporate purposes, including the repayment of near-term indebtedness.

02—Key points

Key Highlights

JCI successfully raised $500.0 million through the issuance of 2.000% Sustainability-Linked Senior Notes due 2031.
The Notes were issued under an Underwriting Agreement with Barclays Capital Inc., Citigroup Global Markets Inc., and Credit Agricole Securities (USA) Inc. as representatives of the underwriters.
Proceeds from the offering will be used for general corporate purposes, including the repayment of near-term debt.
The Notes bear an initial interest rate of 2.000% per annum, payable semi-annually.
A key feature of the Notes is their sustainability-linked nature, with the potential for the interest rate to increase by up to 25 basis points if sustainability performance targets related to Scope 1, 2, or 3 emissions are not met by March 1, 2026.
The Notes mature on September 16, 2031.
The Notes are unsecured and unsubordinated, ranking senior to subordinated debt but junior to secured debt and subsidiary obligations.

03—Questions

Frequently Asked Questions

What is the purpose of this $500 million debt issuance?
Johnson Controls International plc intends to use the net proceeds from this offering for general corporate purposes, which includes the repayment or redemption of near-term indebtedness.
What are the key terms of these new Notes?
The Notes carry a 2.000% interest rate, mature on September 16, 2031, and are unsecured and unsubordinated. Notably, they are sustainability-linked, meaning the interest rate can increase if the company fails to meet specific emissions reduction targets.
What does 'sustainability-linked' mean in this context, and what are the risks if targets aren't met?
Sustainability-linked means the financial terms of the Notes are tied to the achievement of environmental performance targets. In this case, if Johnson Controls does not meet its Scope 1, Scope 2, or Scope 3 emissions targets by a specified date, the annual interest rate on the Notes will increase by up to 25 basis points. This creates a financial incentive for the company to achieve its stated sustainability goals.
How do these Notes rank in terms of priority compared to other debt?
The Notes are unsecured and unsubordinated obligations of the Issuers. They rank senior to any existing or future debt that is expressly subordinated to the Notes and equal to other unsubordinated debt. However, they are effectively junior to any secured indebtedness to the extent of the value of the collateral securing that debt, and structurally junior to any debt issued by JCI's subsidiaries.

04—Continue

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