Summary
Mondelez International, Inc. (MDLZ) filed an 8-K on May 21, 2012, to report the entry into a material definitive agreement, specifically a five-year revolving credit agreement. This agreement, effective May 18, 2012, establishes a $3.0 billion senior unsecured revolving credit facility for its wholly owned subsidiary, Kraft Foods Group, Inc. Mondelez International will act as a guarantor for its subsidiary's obligations under this facility. A key point for investors is that Mondelez International's guarantee will automatically terminate upon the consummation of the previously announced spin-off of its North American grocery business, at which point Kraft Foods Group will assume full responsibility for the credit facility. The facility is intended for general corporate purposes for both entities and is scheduled to terminate in May 2017, with provisions for extension and an earlier termination date linked to the spin-off timeline. This new credit facility is designed to provide financial flexibility to Kraft Foods Group as it prepares for the spin-off and operates as an independent entity. The interest rate will be variable, based on LIBOR or a base rate plus an applicable margin tied to either Mondelez International's or Kraft Foods Group's long-term senior unsecured indebtedness ratings, depending on the spin-off's completion. The agreement also includes covenants that will become more stringent for Kraft Foods Group post-spin-off, ensuring a framework for its financial management. Investors should note that some lenders and their affiliates have existing financial relationships with Mondelez International, which is customary for such agreements.
Key Highlights
- 1Mondelez International entered into a $3.0 billion, five-year senior unsecured revolving credit agreement as a guarantor.
- 2The credit facility is for its wholly owned subsidiary, Kraft Foods Group, Inc., which will be the primary borrower.
- 3Mondelez International's guarantee will automatically terminate upon the completion of the North American grocery business spin-off.
- 4The credit facility is scheduled to mature on May 17, 2017, with potential one-year extensions.
- 5An earlier termination date of March 29, 2013, is stipulated if the spin-off has not occurred by then.
- 6Borrowings will bear interest at a variable rate (LIBOR or base rate) plus an applicable margin based on senior unsecured debt ratings.
- 7Proceeds are for general corporate purposes for Kraft Foods Group and its subsidiaries, and for Mondelez International and its subsidiaries prior to the spin-off.