What is the primary purpose of this new credit agreement?

The primary purpose of the new $300,000,000 unsecured revolving 364-day credit agreement is for general corporate purposes, which includes providing a backstop for the company's commercial paper program.

How does this new credit agreement compare to the previous one?

The new agreement increases the credit facility size from $267,500,000 to $300,000,000 and replaces the expiring 364-day credit agreement. The terms and covenants are substantially similar between the old and new agreements.

What is the 'term-out' option, and what are its implications?

The 'term-out' option allows Rockwell Automation to elect, on March 14, 2011, to convert borrowings under the revolving credit facility into a one-year term loan. Exercising this option incurs a 1% fee on the loan amount, and the interest rate for the term loan is subject to an increased floor rate.

What are the key financial covenants in the agreement?

A significant financial covenant mentioned is that Rockwell Automation's debt-to-capital ratio must not exceed 60 percent. Other standard covenants restrict the incurrence of secured indebtedness, consolidations and mergers, asset sales, and sale-leaseback transactions, with certain exceptions.

ROK 8-K: Material Agreements & Financial Events

Summary

This 8-K filing by Rockwell Automation, Inc. (ROK) on March 18, 2010, primarily announces the execution of a new $300,000,000 unsecured revolving 364-day credit agreement. This new facility replaces a similar $267,500,000 agreement that expired on March 15, 2010, and it will be used for general corporate purposes, including as a backstop for commercial paper. The company also maintains an existing three-year revolving credit agreement. The new credit agreement offers flexible borrowing options with variable interest rates tied to either a base rate or a euro-dollar rate, influenced by the company's credit rating and market indices. A notable feature is a term-out option allowing Rockwell Automation to convert borrowings into a one-year term loan on March 14, 2011, with associated fees and adjusted interest rates. The agreement contains standard covenants and events of default, including a debt-to-capital ratio not exceeding 60%.

Key Highlights

1Rockwell Automation entered into a new $300 million unsecured revolving 364-day credit agreement, effective March 15, 2010.
2This new facility replaces a previously existing $267.5 million unsecured revolving 364-day credit agreement which expired on its termination date.
3The company also retains an existing $267.5 million three-year unsecured revolving credit agreement.
4Proceeds from the new agreement are designated for general corporate purposes, including a backstop for commercial paper.
5Borrowing interest rates are variable and determined by the company's choice of base rate or euro-dollar rate, influenced by credit rating and market conditions.
6A 'term-out' option allows conversion of borrowings to a one-year term loan in March 2011.
7Standard covenants are included, notably a restriction on the debt-to-capital ratio not exceeding 60%.

ROCKWELL AUTOMATION, INC 8-K Report, Material Agreement (Mar 18, 2010)

Summary

Key Highlights

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