Summary
Altria Group, Inc. (MO) filed an 8-K on March 26, 2020, to disclose a significant precautionary borrowing. The company drew the full $3.0 billion available under its senior unsecured revolving credit agreement. This action was taken due to the uncertainty in global capital markets, particularly the commercial paper market, stemming from the COVID-19 outbreak. The primary reasons cited for this borrowing were to increase Altria's cash position and preserve financial flexibility. The company typically relies on the commercial paper market in the second quarter to fund Master Settlement Agreement payments and shareholder dividends. While a portion of the borrowed funds will be used for these obligations, the remainder will be for general corporate purposes. The borrowings mature on August 1, 2023, with an initial interest rate tied to three-month LIBOR plus a 1.00% margin, and can be repaid without penalty.
Key Highlights
- 1Altria Group drew the full $3.0 billion available under its existing $3.0 billion senior unsecured revolving credit agreement.
- 2The borrowing was a precautionary measure due to current uncertainty in global capital markets, specifically the commercial paper market, related to the COVID-19 outbreak.
- 3The company aims to increase its cash position and maintain financial flexibility.
- 4Proceeds will be used to help fund Master Settlement Agreement payments and shareholder dividends, as well as for general corporate purposes.
- 5The full amount borrowed matures on August 1, 2023.
- 6The initial interest rate is based on three-month LIBOR plus a margin of 1.00%, subject to debt rating.
- 7Borrowings under the credit agreement can be repaid at any time without penalty.