8-KMaterial AgreementsFinancial EventsExhibits & Filings

Parker-Hannifin Corp 8-K Report, Material Agreement (Aug 27, 2021)

Filed August 27, 2021For Securities:PH

Summary

Parker-Hannifin Corporation (PH) announced a significant financing event on August 27, 2021, by entering into a Credit Agreement for a $2.0 billion senior unsecured delayed-draw term loan facility. The primary purpose of this facility is to finance a portion of the acquisition consideration for Meggitt plc, an acquisition previously disclosed by the company. This new facility will reduce commitments under the existing Bridge Credit Facility, indicating a strategic move to secure long-term financing for the acquisition. Investors should note that the term loan facility is unsecured and not guaranteed by any subsidiaries. The interest rates are variable, based on either a Base Rate or LIBOR Fixed Rate, plus an applicable margin that is dependent on the company's credit ratings. A ticking fee will also be applied to undrawn commitments. The agreement includes customary covenants, with a key financial covenant related to the Debt to Capitalization Ratio, which must not exceed 0.65 to 1.00 under certain rating conditions. The facility matures three years after funding.

Key Highlights

  • 1Parker-Hannifin entered into a $2.0 billion senior unsecured delayed-draw term loan facility.
  • 2The facility is intended to finance a portion of the Meggitt plc acquisition.
  • 3This new facility will reduce commitments under the existing Bridge Credit Facility.
  • 4The term loan facility is unsecured and does not carry subsidiary guarantees.
  • 5Interest rates will be based on LIBOR or a Base Rate, plus a margin that varies with the company's credit ratings.
  • 6A ticking fee will be charged on undrawn commitments starting October 26, 2021.
  • 7The agreement includes covenants, notably a Debt to Capitalization Ratio limit of 0.65:1.00 if certain credit ratings are not maintained.

Frequently Asked Questions

The primary purpose of the new $2.0 billion senior unsecured delayed-draw term loan facility is to finance a portion of the cash consideration required for Parker-Hannifin's proposed acquisition of Meggitt plc.

The facility is unsecured, matures three years after funding, and bears interest at the company's option at either a Base Rate or a LIBOR Fixed Rate, plus an applicable margin that ranges from 0.0 to 162.5 basis points depending on the company's credit ratings. A ticking fee on undrawn commitments will also apply.

Yes, the agreement contains covenants, including a limitation on the Debt to Capitalization Ratio. If Parker-Hannifin's credit ratings fall below certain levels, this ratio cannot exceed 0.65 to 1.00.

The facility is a 'delayed-draw' term loan, meaning funds can be drawn at a future date, and as of August 27, 2021, no funds had been borrowed. Commitments under the facility will terminate upon the consummation of the Meggitt acquisition, termination of the obligation to consummate the acquisition, or on February 2, 2023 (which may be extended).