8-KMaterial AgreementsFinancial Events

RTX Corp 8-K Report, Material Agreement (Nov 15, 2011)

Filed November 15, 2011For Securities:RTX

Summary

This 8-K filing from United Technologies Corporation (UTC), dated November 14, 2011, announces the entry into a significant $15.0 billion bridge credit agreement. This facility is specifically designed to finance a portion of the cash consideration for UTC's previously announced acquisition of Goodrich Corporation, along with related transaction costs. The agreement underscores UTC's commitment to the Goodrich acquisition and its strategic intent to fund this substantial transaction. The bridge loan is unsecured and has a 364-day term, indicating it's a short-term financing solution expected to be replaced or repaid relatively quickly, likely after the acquisition closes and potentially other long-term financing is arranged. Investors should note that while the bridge loan provides immediate liquidity for the acquisition, the terms of the agreement include provisions for reducing the credit facility and prepaying advances through proceeds from new debt, equity issuances, or asset sales. This suggests UTC may seek to deleverage or optimize its capital structure post-acquisition. The interest rate structure is variable, tied to either an adjusted base rate or LIBOR plus an applicable rate based on UTC's debt ratings, with stepped-up rates over time, incentivizing prompt repayment or refinancing.

Key Highlights

  • 1UTC entered into a $15.0 billion unsecured bridge credit agreement on November 8, 2011.
  • 2The primary purpose of the credit facility is to fund a portion of the cash consideration for the acquisition of Goodrich Corporation.
  • 3The bridge loan has a 364-day term, indicating a short-term financing strategy.
  • 4The agreement includes provisions for reducing loan commitments and prepaying outstanding advances through various sources like debt, equity, or asset sales.
  • 5Interest rates on borrowings are variable, linked to either adjusted base rate or LIBOR, plus an applicable rate based on UTC's credit ratings.
  • 6The credit agreement contains covenants restricting liens, sale-leaseback transactions, and mergers/consolidations.
  • 7Specific events of default are detailed, including non-payment, breaches of covenants, and bankruptcy, with penalties and acceleration clauses after funding.

Frequently Asked Questions

The $15.0 billion bridge credit agreement is intended to provide immediate funding for a portion of the cash needed to complete United Technologies Corporation's (UTC) acquisition of Goodrich Corporation. It also covers related transaction expenses.

The bridge loan is unsecured, has a maximum amount of $15.0 billion, and matures 364 days after it is funded. Interest rates will be based on either an adjusted base rate or LIBOR, plus an applicable rate determined by UTC's debt ratings. The interest rate may increase over time if the loan remains outstanding.

The agreement allows UTC to reduce loan commitments and prepay outstanding advances using proceeds from new debt, issuance of capital stock, or sales of assets. This suggests UTC may aim to replace the bridge financing with other capital sources or reduce leverage post-acquisition.

Funding under the credit agreement is expected to occur substantially concurrently with the consummation of the Goodrich acquisition, subject to customary closing conditions for acquisition financings, which include regulatory and Goodrich shareholder approvals.