Summary
TransDigm Group Inc. (TDG) filed an 8-K on November 23, 2016, primarily to provide an updated interest rate sensitivity analysis for its debt. Following its Q4 2016 earnings call, the company entered into new interest rate derivatives, including a $500 million interest rate swap at a fixed rate of 1.9% and a $450 million interest rate cap at a fixed rate of 2.5%. These new agreements, along with existing ones, effectively fix or cap the interest rate on approximately 75% of TransDigm's total debt.
Key Highlights
- 1TransDigm has entered into new interest rate derivative agreements to manage interest rate risk.
- 2A new $500 million interest rate swap was executed at a fixed rate of 1.9%.
- 3A new $450 million interest rate cap was established at a fixed rate of 2.5%.
- 4Approximately 75% of TransDigm's total debt is now fixed or capped, reducing exposure to rising interest rates.
- 5The filing provides a sensitivity analysis showing the impact of rising LIBO rates on interest expense, assuming rates increase from 1% (guidance basis) to hypothetical 2%, 4%, and 6% scenarios.
- 6Under the sensitivity analysis, total cash interest expense after tax could rise from $385 million (based on 1% LIBO and FY 2017 guidance) to $500 million if LIBO reaches 6%.