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.