Summary
Altria Group, Inc. (MO) has entered into a new $3 billion senior unsecured 5-year revolving credit agreement, effective August 1, 2018. This new facility replaces a previous agreement that was set to expire in August 2020 and had no outstanding borrowings at termination. The new credit agreement also has no immediate borrowings outstanding and is secured by a guarantee from its wholly-owned subsidiary, Philip Morris USA Inc. This move indicates a proactive approach to managing its liquidity and corporate financing, ensuring robust access to capital for general corporate purposes through August 2023, with options for extensions. The terms of the new credit agreement are standard for a company of Altria's stature, with interest rates tied to prevailing market rates and Altria's credit rating. A key financial covenant requires Altria to maintain a consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) to consolidated interest expense ratio of at least 4.0 to 1.0, demonstrating the company's commitment to maintaining financial flexibility and servicing its debt obligations. The replacement of the credit facility, while not immediately impacting cash flow given no outstanding borrowings, signals continuity in its financing strategy.
Key Highlights
- 1Altria Group entered into a new $3 billion senior unsecured 5-year revolving credit agreement on August 1, 2018.
- 2The new credit facility replaces a previous $3 billion revolving credit agreement that was terminated on August 1, 2018.
- 3There were no outstanding borrowings under the previous agreement at its termination, nor under the new agreement upon its inception.
- 4The new credit agreement has an expiration date of August 1, 2023, with options for two additional one-year extensions.
- 5Borrowings will be used for general corporate purposes.
- 6The agreement includes a financial covenant requiring a consolidated EBITDA to interest expense ratio of at least 4.0 to 1.0.
- 7Philip Morris USA Inc. (PM USA), a wholly-owned subsidiary, provides a guarantee for Altria's obligations under the new credit agreement.