8-KMaterial AgreementsFinancial EventsExhibits & Filings

AT&T INC. 8-K Report, Material Agreement (Dec 12, 2012)

Filed December 12, 2012For Securities:TT-PCTBBT-PA

Summary

AT&T Inc. (T) filed an 8-K on December 11, 2012, detailing significant updates to its credit facilities. The company amended and extended its existing $5 billion, four-year revolving credit agreement for an additional year, and also entered into a new $3 billion, five-year revolving credit agreement. These facilities are intended for general corporate purposes. The amendments to the credit agreements demonstrate AT&T's proactive approach to managing its liquidity and financial flexibility. The extension of the four-year agreement and the establishment of a new five-year agreement suggest confidence in the company's long-term financial stability and its ability to secure favorable borrowing terms. Investors should note the specific interest rate structures and covenants associated with these agreements, which provide insight into AT&T's cost of borrowing and financial health.

Key Highlights

  • 1AT&T amended and extended its existing $5 billion, four-year revolving credit agreement for an additional year, now maturing in December 2016.
  • 2A new $3 billion, five-year revolving credit agreement was established, maturing in December 2017.
  • 3Both credit agreements are available for general corporate purposes.
  • 4The amendment to the four-year agreement included a reduction in facilities fees.
  • 5Interest rates on both agreements are variable, tied to a base rate or LIBOR plus an applicable margin that varies based on AT&T's credit ratings.
  • 6The five-year agreement includes a financial covenant requiring AT&T to maintain a debt-to-net income ratio not exceeding 3.0 to 1.
  • 7Events of default under the five-year agreement include failure to pay debt, change of control, breaches of covenants, and ERISA funding deficiencies.

Frequently Asked Questions

The primary purpose of these credit agreements is to provide AT&T with financial flexibility for its general corporate purposes. This includes ensuring access to funds for ongoing operations, potential investments, and managing its working capital needs.

Interest rates are variable and can be based on either a prime rate or the London Interbank Offered Rate (LIBOR), plus an 'Applicable Margin'. This margin is tiered and depends on AT&T's unsecured long-term debt credit ratings from agencies like Standard & Poor's, Moody's, and Fitch.

The debt-to-net income ratio covenant of not more than 3.0 to 1 signifies a commitment by AT&T to maintain a healthy balance between its debt levels and its earnings power. Failure to meet this covenant could trigger default provisions under the agreement.

As of the filing date, AT&T's unsecured long-term debt was rated A- by Standard & Poor's, A2 (under review for downgrade) by Moody's, and A by Fitch.