Summary
TE Connectivity plc (TEL) has filed an 8-K report detailing the execution of a new Five-Year Senior Credit Agreement on June 24, 2011. This new agreement, totaling $1,500 million, replaces a previous $1,425 million credit facility that was set to mature in April 2012. The new credit facility is unsecured and has a maturity date of June 24, 2016, with provisions for potential extensions. The funds are available for a range of corporate purposes, including working capital, capital expenditures, general corporate needs, debt repayment, acquisitions, and equity repurchases. Notably, no funds were drawn at the time of closing.
Key Highlights
- 1TE Connectivity (TEL) entered into a new $1.5 billion, five-year senior unsecured credit agreement on June 24, 2011.
- 2The new credit facility matures on June 24, 2016, and can be extended for two additional one-year terms.
- 3This agreement replaces a previous $1.425 billion senior credit facility that was scheduled to mature in April 2012.
- 4Proceeds from the new credit agreement can be used for working capital, capital expenditures, general corporate purposes, debt repayment, acquisitions, and equity repurchases.
- 5No amounts were drawn under the new credit facility at the time of its closing.
- 6The agreement includes a financial covenant requiring TE Connectivity to maintain a leverage ratio of 3.5 to 1.0 or lower.
- 7The credit agreement contains customary affirmative and negative covenants, including limitations on granting liens, fundamental changes, subsidiary dividends, affiliate transactions, subsidiary guarantees, and incurring additional subsidiary debt.
Frequently Asked Questions
This 8-K filing announces the entry into a new, material definitive agreement: a Five-Year Senior Credit Agreement for $1,500 million. It also details the termination of a previous credit agreement and establishes a new financial obligation for the company.
The new agreement provides for $1,500 million in revolving credit commitments, is unsecured, has a five-year term maturing on June 24, 2016, and can be extended. It allows borrowings in U.S. dollars for working capital, capital expenditures, general corporate purposes, debt repayment, acquisitions, and equity repurchases. TE Connectivity Ltd. is the guarantor, and its subsidiary, Tyco Electronics Group S.A., is the borrower.
The new credit agreement appears to be a strategic refinancing, increasing the available credit line by $75 million and extending the maturity date. This provides the company with enhanced financial flexibility for its operational needs, strategic initiatives, and potential shareholder returns, while replacing an expiring facility.
Yes, the credit agreement includes a financial covenant requiring TE Connectivity to maintain a consolidated total debt to consolidated EBITDA leverage ratio of 3.5 to 1.0 or lower. It also contains negative covenants that limit certain corporate actions, such as granting liens, engaging in fundamental changes, restricting subsidiary distributions, and incurring certain additional subsidiary debt, with customary exceptions.