8-KMaterial AgreementsFinancial EventsExhibits & Filings

ALTRIA GROUP, INC. 8-K Report, Material Agreement (Nov 23, 2009)

Filed November 23, 2009For Securities:MO

Summary

On November 20, 2009, Altria Group, Inc. (Altria) entered into new senior unsecured revolving credit agreements, replacing its previous facility. The company secured a $600 million 364-day revolving credit agreement and a $2.4 billion 3-year revolving credit agreement, both expiring in 2010 and 2012, respectively. These new credit lines, with JPMorgan Chase Bank, N.A. and Citibank, N.A. as administrative agents, will be used for general corporate purposes and to support Altria's commercial paper issuances. Notably, Altria's wholly-owned subsidiary, Philip Morris USA Inc. (PM USA), is providing guarantees for these new credit facilities. The agreements include covenants requiring Altria to maintain a debt-to-EBITDA ratio not exceeding 3.0 to 1 and an EBITDA-to-interest expense ratio of at least 4.0 to 1. As of the filing date, there were no outstanding borrowings under these new agreements.

Key Highlights

  • 1Altria entered into a new $600 million 364-day revolving credit agreement and a $2.4 billion 3-year revolving credit agreement.
  • 2The new credit facilities replace a prior $3.4 billion agreement that was terminated.
  • 3Philip Morris USA Inc. (PM USA) provided guarantees for the new credit agreements.
  • 4The credit agreements are unsecured and have expiration dates of November 19, 2010, and November 20, 2012.
  • 5Funds from the credit facilities are designated for general corporate purposes and to support commercial paper issuances.
  • 6Key financial covenants include a maximum debt-to-EBITDA ratio of 3.0:1 and a minimum EBITDA-to-interest expense ratio of 4.0:1.
  • 7No borrowings were outstanding under the new credit agreements as of November 20, 2009.

Frequently Asked Questions

Altria secured a total borrowing capacity of $3.0 billion through the two new revolving credit agreements: $600 million under the 364-day agreement and $2.4 billion under the 3-year agreement.

The filing indicates that the new agreements replaced the existing $3.4 billion 5-year revolving credit agreement, which was scheduled to expire on April 15, 2010, and was terminated effective November 20, 2009. This suggests Altria sought to establish new terms and potentially a different maturity profile for its credit facilities.

PM USA's guarantees mean that the subsidiary's assets or creditworthiness are backing Altria's obligations under the credit agreements. This is a common practice to secure financing, especially for a parent company. The guarantees are senior unsecured obligations of PM USA, ranking equally with its other senior unsecured indebtedness.

Altria must maintain a ratio of debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) of not more than 3.0 to 1. Additionally, the company must maintain a ratio of EBITDA to interest expense of not less than 4.0 to 1.