8-KMaterial AgreementsOther EventsExhibits & Filings

TE Connectivity plc 8-K Report, Material Agreement (Dec 6, 2018)

Filed December 6, 2018For Securities:TEL

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.

Frequently Asked Questions

The net proceeds of approximately $349.3 million from the issuance of these Senior Floating Rate Notes are intended for general corporate purposes. This suggests TE Connectivity is managing its capital structure, potentially for working capital, investments, or other business needs.

The notes are unsecured and rank equally with TEGSA's other senior debt. While TE Connectivity provides an unconditional guarantee, the primary risks include interest rate fluctuations (as they are floating rate notes), the creditworthiness of TE Connectivity, and potential defaults outlined in the indenture. The change of control provision offers some protection if the company's financial standing deteriorates significantly post-acquisition.

The floating rate means TE Connectivity's interest expense will increase if market interest rates rise and decrease if they fall. This can create some variability in their quarterly interest payments and overall financing costs, making it important for investors to monitor interest rate trends.

Yes, the Indenture contains covenants that limit TEGSA's ability to create liens on its assets without securing these notes, and it also restricts certain sale and lease-back transactions. Additionally, there are limitations on consolidating, merging, or transferring substantially all of their assets. These restrictions are designed to protect the noteholders.