Summary
This 8-K filing reports that Rockwell Automation, Inc. (ROK) has entered into a new $750 million, four-year unsecured revolving credit agreement, effective March 14, 2011. This new facility replaces two previous credit agreements, totaling $567.5 million, which were terminated concurrently or by their stated maturity. The company incurred no early termination penalties. The proceeds from this new credit line are designated for general corporate purposes, including supporting commercial paper issuance, potential acquisitions, and stock repurchase programs. This move signals a strengthening of the company's liquidity and financial flexibility, providing resources for strategic growth initiatives and operational needs.
Key Highlights
- 1Rockwell Automation secured a new $750 million, four-year unsecured revolving credit facility.
- 2The new credit agreement replaces two prior agreements totaling $567.5 million.
- 3No penalties were incurred for the early termination of the old credit agreements.
- 4Proceeds are earmarked for general corporate purposes, including commercial paper backstop, acquisitions, and stock repurchases.
- 5The credit facility includes covenants restricting secured debt, mergers, asset sales, and sale-leaseback transactions.
- 6A key covenant limits the company's debt to capital ratio to 60%.
- 7Various customary events of default are outlined, including non-payment, covenant breaches, material misrepresentations, acceleration of other debt, and change of control.
Frequently Asked Questions
The primary purpose of the new $750 million credit agreement is to enhance Rockwell Automation's financial flexibility for general corporate purposes. This includes providing a backstop for its commercial paper program, funding potential acquisitions, and supporting stock repurchase activities.
The new $750 million facility is larger than the combined previous agreements ($567.5 million) and has a longer term of four years compared to the previous three-year and 364-day agreements. Importantly, Rockwell Automation incurred no penalties for terminating the older agreements.
The agreement contains standard covenants that restrict the incurrence of secured indebtedness, consolidations and mergers, asset sales, and sale-leaseback transactions, subject to certain exceptions. A significant covenant requires that Rockwell Automation's debt to capital ratio must not exceed 60%.
Lenders can terminate the agreement or accelerate the debt under various conditions. These include bankruptcy or insolvency events, failure to pay principal when due, material breaches of covenants or representations, acceleration of other material debt of the company, and a change of control event. Some defaults may require notice and cure periods.