Summary
Qualcomm Incorporated (QCOM) filed an 8-K on November 8, 2016, detailing its entry into two significant credit agreements. The primary focus for investors is the $4.0 billion senior unsecured delayed-draw term loan facility. This facility is specifically earmarked to finance the proposed acquisition of NXP Semiconductors N.V., a transaction previously disclosed on October 27, 2016. The commitments for this term loan will expire upon the consummation of the acquisition or other specified termination events. Additionally, Qualcomm amended and restated its revolving credit agreement, increasing the aggregate principal amount to $5.0 billion. This facility is intended for general corporate purposes, including working capital and capital expenditures. Both credit facilities are unsecured and subject to customary covenants, including a minimum consolidated EBITDA to interest expense ratio of 3.00 to 1.00. The terms suggest Qualcomm is proactively securing financing for a major strategic acquisition while also reinforcing its general corporate liquidity.
Key Highlights
- 1Entered into a $4.0 billion senior unsecured delayed-draw term loan facility to finance the acquisition of NXP Semiconductors.
- 2Increased its revolving credit facility to $5.0 billion for general corporate purposes, working capital, and capital expenditures.
- 3The term loan facility commitments expire upon the consummation of the NXP acquisition or other specified termination events.
- 4Both new and amended credit agreements are unsecured and not expected to be guaranteed by subsidiaries.
- 5Key financial covenants include maintaining a consolidated EBITDA to interest expense ratio of at least 3.00 to 1.00.
- 6Interest rates on both facilities are tied to either a reserve-adjusted Eurocurrency Rate or a Base Rate, plus varying margins that can fluctuate based on credit ratings.
- 7A ticking fee will be applied to the undrawn portion of the term loan facility starting December 26, 2016, until funding or termination of commitments.