8-KMaterial AgreementsFinancial EventsExhibits & Filings

STARBUCKS CORP 8-K Report, Material Agreement (Sep 17, 2021)

Filed September 17, 2021For Securities:SBUX

Summary

Starbucks Corporation (SBUX) announced on September 16, 2021, the execution of a new $3.0 billion unsecured, revolving credit facility, referred to as the "Five-Year Credit Agreement." This new facility, maturing on September 16, 2026, replaces existing credit agreements and provides significant financial flexibility. It includes an option to increase commitments by up to $1.0 billion under certain conditions, demonstrating the company's proactive approach to managing its liquidity and capital structure. The new credit facility is structured with variable interest rates tied to LIBOR (with provisions for alternative rates) and a Base Rate, influenced by Starbucks' credit ratings. Key covenants include maintaining a minimum fixed charge coverage ratio of 2.50 to 1. The agreement also outlines standard events of default and cure periods. The termination of prior credit agreements was executed concurrently with the establishment of this new, larger facility, underscoring a strategic refinancing effort.

Key Highlights

  • 1Starbucks entered into a new $3.0 billion unsecured, revolving credit facility on September 16, 2021.
  • 2The new credit facility matures on September 16, 2026, providing a five-year term.
  • 3The agreement allows for potential increases in aggregate commitments by up to $1.0 billion.
  • 4Borrowings will bear interest at variable rates based on LIBOR or a Base Rate, plus an applicable margin tied to credit ratings.
  • 5The facility requires Starbucks to maintain a minimum fixed charge coverage ratio of 2.50 to 1.
  • 6Standard covenants and events of default, including cure periods, are included in the agreement.
  • 7This new facility replaces previously existing credit agreements.

Frequently Asked Questions

The new $3.0 billion revolving credit facility provides Starbucks with significant financial flexibility, ensuring access to capital for general corporate purposes, potential acquisitions, working capital needs, and strategic initiatives. It also serves to update and potentially lower borrowing costs based on current credit ratings and market conditions.

The new facility replaces existing credit agreements, consolidating Starbucks' credit lines under a single, larger, and potentially more favorable agreement. While it represents a material definitive agreement, the termination of older facilities suggests a strategic refinancing rather than an increase in overall debt, assuming similar utilization levels.

A primary financial covenant is the requirement to maintain a minimum fixed charge coverage ratio of 2.50 to 1. This ratio indicates the company's ability to cover its fixed obligations, such as interest and lease payments, with its earnings before interest, taxes, depreciation, and amortization (EBITDA).

The provision allowing for an increase of up to $1.0 billion in commitments signifies Starbucks' potential future capital needs or its confidence in maintaining favorable borrowing terms. It offers the company optionality to access additional liquidity if required, subject to lender approval and specified conditions.