What is the primary purpose of these new loan agreements?

The primary purpose of both the 364-Day Bridge Term Loan Agreement and the Term Loan Agreement is to finance Harris Corporation's acquisition of Exelis Inc. and cover related transaction expenses.

How much total financing has Harris secured for the Exelis acquisition through these agreements?

Through these two agreements, Harris has secured a total of $3.4 billion in financing: $2.1 billion from the Bridge Term Loan Agreement and $1.3 billion from the Term Loan Agreement.

What are the expected repayment terms for these loans?

The Bridge Loan Agreement matures 364 days after the "Bridge Closing Date." The Term Loan Agreement has two tranches: a 3-year tranche maturing three years after the "Term Closing Date" and a 5-year tranche maturing five years after the "Term Closing Date." Both agreements also include provisions for mandatory and voluntary prepayments.

Are there any restrictions on Harris Corporation's financial flexibility due to these agreements?

Yes, the loan agreements contain various covenants. These include limitations on liens, mergers, asset sales, and specific investment types. Crucially, they impose a maximum ratio of consolidated total indebtedness to total capital, restricting the company's leverage.

LHX 8-K: Material Agreements & Financial Events

Summary

L3Harris Technologies, Inc. (formerly Harris Corporation) filed an 8-K on March 18, 2015, reporting the entry into two significant loan agreements on March 16, 2015. These agreements, a 364-Day Bridge Term Loan Agreement and a Term Loan Agreement, are directly tied to the company's anticipated acquisition of Exelis Inc. The Bridge Loan Agreement provides up to $2.1 billion, intended to fund the Exelis acquisition and related costs, with the expectation that it will be refinanced by other debt instruments. The Term Loan Agreement provides an additional $1.3 billion, split into 3-year and 5-year tranches, also for the Exelis acquisition. These financing arrangements indicate a substantial commitment by L3Harris to the Exelis acquisition, signaling a significant strategic move for the company. The agreements detail interest rates tied to LIBOR or base rates, along with applicable margins based on the company's debt ratings. They also include covenants related to financial performance (debt-to-capital ratio), operational compliance, and restrictions on asset sales and mergers, along with standard events of default. Investors should note that these agreements are crucial for understanding the financing structure and potential leverage associated with the Exelis acquisition.

Key Highlights

1Harris Corporation entered into a $2.1 billion 364-Day Bridge Term Loan Agreement to finance the acquisition of Exelis Inc.
2A separate Term Loan Agreement for $1.3 billion (split into 3-year and 5-year tranches) was also secured to fund the Exelis acquisition.
3Proceeds from both loan agreements are earmarked for consummating the Exelis acquisition and related transaction costs.
4Interest rates on the loans are variable, based on either the Eurodollar rate (LIBOR) or a base rate, plus applicable margins determined by Harris's senior debt ratings.
5The loan agreements include financial covenants, such as a maximum consolidated total indebtedness to total capital ratio, and operational covenants.
6Events of default include non-payment, breaches of covenants, material inaccuracies of representations, cross-defaults on other debt, ERISA liabilities, and insolvency.
7The company expects to replace or refinance some or all of the bridge loans with other forms of debt and equity.

L3HARRIS TECHNOLOGIES, INC. /DE/ 8-K Report, Material Agreement (Mar 19, 2015)

Summary

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