8-KMaterial AgreementsFinancial EventsExhibits & Filings

STARBUCKS CORP 8-K Report, Material Agreement (Feb 8, 2013)

Filed February 8, 2013For Securities:SBUX

Summary

Starbucks Corporation (SBUX) has announced the entry into a new $750 million unsecured, revolving credit facility, maturing on February 5, 2018. This facility provides significant financial flexibility, with the option to increase commitments by an additional $750 million, potentially bringing the total facility to $1.5 billion. The new credit line replaces a previous agreement and indicates the company's proactive management of its liquidity and financing arrangements. This new credit facility is priced based on the company's credit ratings and fixed charge coverage ratio, offering favorable variable interest rates tied to LIBOR or a Base Rate, plus an applicable margin. The agreement includes standard covenants, such as maintaining a minimum fixed charge coverage ratio of 2.50 to 1, and customary events of default. The termination of the prior credit agreement on November 17, 2010, alongside the establishment of this new facility, signals a strategic update to Starbucks' capital structure and its commitment to maintaining strong financial health.

Key Highlights

  • 1Starbucks entered into a new $750 million unsecured, revolving credit facility on February 5, 2013.
  • 2The new credit facility matures on February 5, 2018.
  • 3The company has the option to increase the aggregate commitments by up to an additional $750 million, for a total potential facility of $1.5 billion.
  • 4Borrowings will bear interest at variable rates (LIBOR or Base Rate) plus an applicable margin based on credit ratings and fixed charge coverage ratio.
  • 5The agreement requires Starbucks to maintain a minimum fixed charge coverage ratio of 2.50 to 1.
  • 6The new credit facility replaces a previous credit agreement dated November 17, 2010.
  • 7The facility includes provisions for letters of credit, with $150 million available for such issuances.

Frequently Asked Questions

The primary purpose of the new credit facility is to provide Starbucks with financial flexibility and liquidity. It serves as a readily available source of funds for general corporate purposes, potential strategic initiatives, or to manage working capital needs.

The new facility is larger ($750 million, with an option to increase to $1.5 billion) compared to the previous agreement which was terminated. It also has a slightly longer maturity date (February 5, 2018 vs. an unstated maturity in the prior agreement). The terms, including interest rate structure and covenants, may also differ.

A key financial covenant mentioned is the requirement to maintain a minimum fixed charge coverage ratio of 2.50 to 1. The agreement also contains customary events of default that Starbucks must avoid.

Borrowings will bear interest at a variable rate based on LIBOR or a Base Rate, plus an applicable margin. This margin is determined by Starbucks' long-term credit ratings from Moody's and Standard & Poor's, or its fixed charge coverage ratio, whichever results in a lower margin.