8-KMaterial AgreementsFinancial EventsExhibits & Filings

TE Connectivity plc 8-K Report, Material Agreement (Dec 21, 2011)

Filed December 21, 2011For Securities:TEL

Summary

TE Connectivity Ltd. (TEL) filed an 8-K on December 21, 2011, to report the entry into a material definitive agreement. Specifically, on December 20, 2011, a wholly-owned subsidiary, Tyco Electronics Group S.A. (TEGSA), as borrower, entered into a $700 million 364-day unsecured revolving credit facility. TE Connectivity Ltd. is the guarantor of this agreement. This new credit facility effectively terminates a previously filed bridge commitment letter. The primary purpose of this credit line is to provide liquidity for working capital, capital expenditures, general corporate purposes, debt repayment, acquisitions, and equity repurchases. Importantly, no funds were drawn at the time of closing, indicating the facility serves as a precautionary measure or for future flexibility. The agreement includes typical covenants, such as a leverage ratio not exceeding 3.5 to 1.0 (consolidated total debt to consolidated EBITDA), and various negative covenants restricting certain corporate actions.

Key Highlights

  • 1TE Connectivity Ltd. (TEL) secured a new $700 million 364-day unsecured revolving credit facility for its subsidiary, Tyco Electronics Group S.A. (TEGSA).
  • 2The credit agreement was entered into on December 20, 2011.
  • 3The facility is intended for general corporate purposes, including working capital, capital expenditures, debt repayment, acquisitions, and equity repurchases.
  • 4No proceeds were drawn from the credit facility at the time of closing.
  • 5The agreement is guaranteed by TE Connectivity Ltd.
  • 6A key financial covenant requires maintaining a leverage ratio of 3.5:1.0 or lower (consolidated total debt to consolidated EBITDA).
  • 7The new credit agreement terminates a previously disclosed bridge commitment letter.

Frequently Asked Questions

The $700 million 364-day unsecured revolving credit facility is intended to provide TE Connectivity and its subsidiaries with financial flexibility for various corporate needs. These include working capital, capital expenditures, general corporate purposes, repayment of existing debt, acquisitions, and equity repurchases.

Not necessarily at the time of the filing. The report states that no proceeds were drawn from the credit facility at closing. This suggests the facility is in place to provide liquidity and financial flexibility for future needs rather than to fund immediate expenditures or refinance existing debt.

The agreement includes standard affirmative and negative covenants. A significant financial covenant requires TE Connectivity to maintain a leverage ratio (consolidated total debt to consolidated EBITDA) of 3.5 to 1.0 or lower. Negative covenants restrict actions such as granting liens, engaging in fundamental changes (like mergers), restricting subsidiary dividends, transacting with affiliates, providing subsidiary guarantees for other debt, and incurring certain additional subsidiary debt.

Upon entering into this new 364-day Credit Agreement, the previously disclosed Bridge Commitment Letter automatically terminated according to its terms. This indicates the new facility has replaced the previous arrangement.