8-KMaterial AgreementsFinancial EventsExhibits & Filings

AT&T INC. 8-K Report, Material Agreement (Dec 15, 2015)

Filed December 15, 2015For Securities:TT-PCTBBT-PA

Summary

AT&T Inc. (T) has announced the execution of a new $12 billion revolving credit agreement, replacing a previous $5 billion facility. This significantly expands AT&T's available credit and extends its maturity to December 2020, with options for two one-year extensions. The increased liquidity is primarily intended for general corporate purposes, indicating AT&T's proactive approach to managing its financial flexibility. The new agreement features variable interest rates tied to AT&T's credit rating, with specific margins for base and Eurocurrency rate advances. The company also pays a facility fee, currently at 0.090% based on its BBB+/Baa1/A- credit ratings. Key covenants include a net debt-to-EBITDA ratio not exceeding 3.5:1 and customary provisions for an investment-grade issuer. The termination of a prior $3 billion credit agreement is a consequence of entering into this larger, more comprehensive facility.

Key Highlights

  • 1AT&T entered into a new $12 billion revolving credit agreement, increasing its borrowing capacity by $7 billion compared to the previous $5 billion facility.
  • 2The new credit agreement has a termination date of December 11, 2020, with the possibility of two one-year extensions, providing longer-term financial flexibility.
  • 3Funds drawn under the new agreement are designated for general corporate purposes.
  • 4Interest rates on advances are variable and dependent on AT&T's credit rating, impacting the Applicable Margin and facility fees.
  • 5A significant financial covenant requires AT&T to maintain a net debt-to-EBITDA ratio of not more than 3.5 to 1.
  • 6The filing also notes the termination of a prior $3 billion credit agreement, superseded by the new $12 billion facility.
  • 7Events of default include non-payment, breaches of covenants, and cross-acceleration clauses related to other material debt exceeding $750 million.

Frequently Asked Questions

The primary purpose of the new $12 billion revolving credit agreement is to enhance AT&T's general corporate purposes. This means the funds can be used for a variety of operational needs, strategic initiatives, or to maintain financial flexibility.

This new agreement replaces a prior $5 billion credit facility and also leads to the termination of a separate $3 billion credit agreement. By increasing the available credit and extending the maturity, AT&T is strengthening its liquidity position. The covenants, particularly the net debt-to-EBITDA ratio, will require ongoing management of its leverage.

The most prominent financial covenant is maintaining a net debt-to-EBITDA ratio of not more than 3.5 to 1. Additionally, there are customary covenants for an investment-grade issuer, along with provisions related to events of default such as failure to pay, breaches of representations, non-compliance with covenants, and cross-acceleration clauses on other debt.

Interest rates are variable and depend on AT&T's credit rating. Borrowings can be at a base rate or a Eurocurrency rate (like LIBOR), plus an applicable margin. The specific margin, as well as the facility fee, is tiered based on AT&T's credit ratings from agencies like S&P, Moody's, and Fitch.