Summary
TE Connectivity plc (TEL) has filed an 8-K report detailing the issuance of $350 million in Senior Floating Rate Notes due June 2020 by its wholly-owned subsidiary, Tyco Electronics Group S.A. (TEGSA). The net proceeds from this debt issuance amount to approximately $349.3 million and are designated for general corporate purposes. These notes are fully and unconditionally guaranteed by TE Connectivity on an unsecured senior basis. The filing also outlines key terms, including covenants limiting liens and sale-leaseback transactions, and provisions for repurchase in the event of a change of control that results in the notes being downgraded below investment grade by two major credit rating agencies. This transaction represents a routine financing activity for TE Connectivity, aimed at bolstering its corporate liquidity. Investors should note the floating rate nature of the debt, which means interest payments will fluctuate with market rates. The covenants provide some protection, but the unsecured senior status means these notes rank equally with other senior debt. The change of control provision offers a degree of security to noteholders in specific adverse scenarios.
Key Highlights
- 1TE Connectivity subsidiary, TEGSA, issued $350 million in Senior Floating Rate Notes due June 2020.
- 2Net proceeds of approximately $349.3 million will be used for general corporate purposes.
- 3The Notes are fully and unconditionally guaranteed by TE Connectivity plc on an unsecured senior basis.
- 4The Indenture includes covenants that limit TEGSA's ability to create liens and enter into sale-leaseback transactions.
- 5A change of control provision requires TEGSA to repurchase the notes at 101% of principal plus accrued interest if credit ratings fall below investment grade.
- 6The notes are floating rate, meaning interest expense will vary with market interest rates.
- 7Standard events of default are defined, including payment defaults, breaches of covenants, and bankruptcy events.