What is the purpose of the new revolving credit facility?

The new $2 billion revolving credit facility is primarily intended for working capital, general corporate purposes, and to provide flexibility for refinancing existing debt and commercial paper. It ensures L3Harris has access to liquidity for its ongoing operations and strategic initiatives.

How does this new credit facility compare to the previous one?

The new facility is identical in size ($2 billion) and term (five years) to the prior facility established in 2019. However, it has been updated with new banking partners and potentially updated terms reflecting current market conditions. Crucially, no loans were outstanding under the old facility at the time of its termination, indicating a smooth transition and no immediate need for borrowing.

Are there any conditions or restrictions on borrowing under the new facility?

Yes, borrowings are subject to certain conditions outlined in the agreement, including the absence of defaults and accuracy of representations. Proceeds are restricted from being used for hostile acquisitions. The facility also includes covenants such as maintaining a debt-to-capital ratio not exceeding 0.65:1.00 and limitations on liens, mergers, asset sales, and investments in unrestricted subsidiaries.

What is the interest rate structure for the new credit facility?

Borrowings in U.S. Dollars can bear interest based on Adjusted Term SOFR, Adjusted Daily Simple SOFR, or a base rate. The applicable margins over these rates will vary based on L3Harris's senior unsecured long-term debt ratings. For non-U.S. dollar borrowings, rates like the EURIBO rate will apply, also with applicable margins.

LHX 8-K: Material Agreements & Financial Events

Summary

L3Harris Technologies, Inc. (LHX) announced the establishment of a new $2 billion, five-year senior unsecured revolving credit facility, effective July 29, 2022. This new facility replaces a prior $2 billion agreement from 2019 and matures on July 29, 2027. Importantly, no borrowings were outstanding under the old facility at the time of its termination, and no early termination penalties were incurred. The new credit facility provides L3Harris with significant financial flexibility for general corporate purposes, working capital, and potential refinancing needs. The facility offers a substantial $2 billion borrowing capacity, with potential for an additional $1 billion increase at the company's discretion, bringing the total potential capacity to $3 billion. It allows for borrowings in multiple currencies, including U.S. Dollars, Euros, and Sterling, up to a non-U.S. currency sub-limit of $400 million. The terms include various interest rate options based on SOFR or a base rate, with margins that adjust based on L3Harris's senior debt ratings. This refinancing demonstrates the company's proactive approach to managing its liquidity and capital structure.

Key Highlights

1L3Harris established a new $2 billion, five-year senior unsecured revolving credit facility, effective July 29, 2022.
2The new facility replaces a prior $2 billion credit agreement from June 2019, which was terminated without any outstanding loans or early termination penalties.
3The credit facility matures on July 29, 2027, providing a five-year term.
4The company has the option to increase the credit facility by an additional $1 billion, potentially reaching a total capacity of $3 billion.
5Borrowings can be made in multiple currencies, including U.S. Dollars, Euros, and Sterling, with specific sub-limits for non-U.S. currencies.
6Interest rates are tied to SOFR or a base rate, with margins that can adjust based on L3Harris's senior debt ratings.
7The proceeds are primarily for working capital and general corporate purposes, with restrictions on hostile acquisitions.

L3HARRIS TECHNOLOGIES, INC. /DE/ 8-K Report, Material Agreement (Aug 4, 2022)

Summary

Key Highlights

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