Summary
McDonald's Corporation (MCD) filed an 8-K on March 25, 2020, announcing the execution of a 364-day Revolving Credit Agreement for $1 billion, fully drawn on the same day. This action was taken as a precautionary measure to bolster cash reserves and enhance financial flexibility amidst the uncertainty caused by the COVID-19 pandemic. The company emphasized that this was a proactive step, as it also has $3.5 billion available under an existing, unborrowed credit facility from December 2018. This new credit facility provides immediate liquidity for general corporate purposes. Interest rates are tied to either LIBOR or a base rate, plus a margin based on public debt ratings. A facility fee of 0.375% per annum is payable on undrawn commitments. The agreement includes standard representations, covenants, and events of default, and requires the company to secure its obligations under this new agreement if other senior debt becomes secured. This demonstrates a conservative approach to managing liquidity during a period of significant economic disruption.
Key Highlights
- 1McDonald's entered into a new $1 billion 364-day Revolving Credit Agreement on March 25, 2020.
- 2The full $1 billion committed amount was borrowed immediately upon execution of the agreement.
- 3The borrowing was a precautionary measure to strengthen cash position and provide financial flexibility due to COVID-19 uncertainty.
- 4The company also has an unborrowed $3.5 billion credit facility from a December 2018 agreement.
- 5Proceeds from the new credit agreement are for general corporate purposes.
- 6Interest rates are based on LIBOR or a base rate, plus a margin determined by public debt ratings.
- 7A facility fee of 0.375% per annum applies to undrawn commitments on the new credit agreement.