8-KMaterial AgreementsFinancial EventsExhibits & Filings

MOODYS CORP /DE/ 8-K Report, Material Agreement (Apr 24, 2012)

Filed April 24, 2012For Securities:MCO

Summary

Moody's Corporation (MCO) announced on April 24, 2012, the execution of a new five-year senior, unsecured revolving credit facility totaling $1 billion. This facility, effective April 18, 2012, replaces an existing credit line that was set to expire in September 2012. The new facility provides crucial financial flexibility, with proceeds earmarked for general corporate purposes, including support for its commercial paper program, share repurchases, and potential acquisitions. The agreement features variable interest rates tied to LIBOR plus a spread based on Moody's Total Debt to EBITDA ratio, indicating a cost of borrowing that aligns with its financial leverage. Additionally, the company will pay quarterly facility fees. The credit facility includes covenants that restrict certain corporate actions like mergers, asset sales, and incurring liens, and mandates the maintenance of a Total Debt to EBITDA ratio of no more than 4 to 1. This update demonstrates Moody's proactive approach to managing its liquidity and capital structure.

Key Highlights

  • 1Moody's Corporation secured a new $1 billion, five-year revolving credit facility effective April 18, 2012.
  • 2The new facility replaces an existing $1 billion credit line maturing in September 2012.
  • 3Proceeds are designated for general corporate purposes, including commercial paper support, share repurchases, and acquisitions.
  • 4Interest rates are variable, based on LIBOR plus a spread that adjusts with Moody's Total Debt to EBITDA ratio.
  • 5The facility includes financial covenants, notably requiring a Total Debt to EBITDA ratio not to exceed 4:1.
  • 6Covenants also restrict certain corporate actions such as mergers, asset sales, and incurring liens without lender approval.

Frequently Asked Questions

The $1 billion revolving credit facility is intended for general corporate purposes, providing financial flexibility for Moody's Corporation. This includes supporting its $1 billion commercial paper program, facilitating share repurchases, and financing potential acquisitions.

The interest rate is based on the London InterBank Offered Rate (LIBOR) plus a variable premium. This premium ranges from 77.5 to 120 basis points and is determined by Moody's ratio of total indebtedness to its earnings before interest, taxes, depreciation, and amortization (Total Debt to EBITDA ratio).

Yes, the facility contains financial covenants. Most notably, Moody's Corporation must maintain a Total Debt to EBITDA ratio of no more than 4 to 1 at the end of each fiscal quarter. The agreement also includes covenants that restrict the company's ability to engage in certain transactions, such as mergers, asset sales, and incurring liens, without lender consent.

Moody's is proactively managing its liquidity and capital structure. The new facility replaces an existing one set to expire in September 2012, ensuring continuity of its credit access and potentially providing more favorable terms or flexibility with the new agreement, which has a five-year term.