What is the primary purpose of this $2.375 billion debt issuance?

The primary purpose of this significant debt offering is to fund Parker-Hannifin's proposed acquisition of LORD Corporation. The proceeds will be used in conjunction with existing credit facilities and commercial paper programs to finance this strategic transaction.

What happens to the proceeds if the LORD Corporation acquisition does not go through?

If the LORD Corporation acquisition is not consummated by April 27, 2020, or if the merger agreement is terminated prior to that date, the 2024 Notes and 2049 Notes will be subject to a special mandatory redemption at 101% of their principal amount. The proceeds from the 2029 Notes, in this scenario, will be used for general corporate purposes.

What are the interest rates and maturity dates of the new notes?

The offering includes $575.0 million of senior notes due 2024 at 2.700% interest, $1.0 billion of senior notes due 2029 at 3.250% interest, and $800.0 million of senior notes due 2049 at 4.000% interest. Interest payments are scheduled semi-annually.

Does the company have flexibility to repay these notes early?

Yes, Parker-Hannifin has the option to redeem some or all of the notes prior to their maturity dates. This can be done subject to a make-whole payment for earlier redemptions, or at par value after certain specified dates for each series of notes.

PH 8-K: Material Agreements & Financial Events

Summary

Parker-Hannifin Corporation (PH) filed an 8-K on June 14, 2019, to announce the successful completion of a significant registered offering of senior notes totaling $2.375 billion. This offering includes $575.0 million in notes due 2024, $1.0 billion due 2029, and $800.0 million due 2049, with coupon rates of 2.700%, 3.250%, and 4.000% respectively. The primary purpose of this capital raise is to fund the proposed acquisition of LORD Corporation, demonstrating the company's strategic intent to expand its operations through a major acquisition. The financing structure also indicates flexibility, as net proceeds, alongside existing credit facilities and commercial paper, will be used for the LORD acquisition. Importantly, the company has established specific provisions for the use of proceeds from the 2029 notes and a special mandatory redemption clause for the 2024 and 2049 notes should the LORD acquisition not be consummated by April 27, 2020, or if the merger agreement is terminated. This filing provides crucial insight into Parker-Hannifin's financial strategy and commitment to growth via acquisition.

Key Highlights

1Completion of a $2.375 billion senior notes offering across three maturities: 2024 ($575M), 2029 ($1.0B), and 2049 ($800M).
2The notes carry interest rates of 2.700% (2024), 3.250% (2029), and 4.000% (2049).
3The primary use of proceeds is to finance the previously announced acquisition of LORD Corporation.
4Contingency plan in place: proceeds from the 2029 notes will be used for general corporate purposes if the LORD acquisition is not consummated.
5Special mandatory redemption provisions exist for the 2024 and 2049 notes (at 101% of principal) if the LORD acquisition is not completed by April 27, 2020, or if the merger agreement is terminated.
6The company may redeem notes prior to maturity with a make-whole provision or at par after specified dates.
7The notes are subject to standard covenants and events of default, including change of control provisions requiring an offer to purchase at 101%.

Parker-Hannifin Corp 8-K Report, Material Agreement (Jun 14, 2019)

Summary

Key Highlights

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