8-KMaterial AgreementsFinancial EventsExhibits & Filings

THERMO FISHER SCIENTIFIC INC. 8-K Report, Material Agreement (Jul 1, 2016)

Filed July 1, 2016For Securities:TMO

Summary

Thermo Fisher Scientific Inc. (TMO) has announced the entry into three significant credit agreements on July 1, 2016, totaling $6.5 billion in borrowing capacity. These agreements include a $2.0 billion 364-day senior unsecured Bridge Credit Agreement, a $2.0 billion 3-year senior unsecured Term Loan Agreement, and a $2.5 billion 5-year senior unsecured Revolving Credit Agreement. The primary purpose of the Bridge and Term Loan facilities is to finance the acquisition of FEI Company, with proceeds available to cover acquisition costs and related debt. The Revolving Credit Agreement, which replaces an existing facility, is earmarked for general corporate purposes including working capital, capital expenditures, acquisitions, stock repurchases, and debt refinancing.

Key Highlights

  • 1Thermo Fisher Scientific secured $6.5 billion in new credit facilities: a $2.0 billion bridge loan, a $2.0 billion term loan, and a $2.5 billion revolving credit facility.
  • 2The $2.0 billion bridge loan has a 364-day term and is specifically intended to fund the acquisition of FEI Company.
  • 3The $2.0 billion term loan has a 3-year maturity and will also be used to finance the FEI Company acquisition, including associated transaction costs and debt.
  • 4The $2.5 billion revolving credit facility has a 5-year term, replaces a prior $1.5 billion facility, and will support general corporate purposes like working capital, capital expenditures, and other acquisitions.
  • 5Interest rates on these facilities are variable, based on a Eurocurrency Rate or Base Rate plus a margin that fluctuates with the Company's Debt Ratings.
  • 6All credit agreements include customary covenants, such as restrictions on liens, indebtedness, and fundamental changes, as well as financial covenants related to leverage ratios (debt-to-EBITDA) and interest coverage ratios.
  • 7The leverage ratio covenants have step-down provisions, becoming more stringent over time and can be temporarily increased to 4.5x following a 'Qualified Acquisition'.

Frequently Asked Questions

The primary purpose of the $2.0 billion Bridge Credit Agreement and the $2.0 billion Term Loan Agreement is to provide financing for Thermo Fisher Scientific's acquisition of FEI Company. The $2.5 billion Revolving Credit Agreement is for general corporate purposes, including working capital, capital expenditures, acquisitions, stock repurchases, and debt refinancing, and it replaces the company's previous revolving credit facility.

Thermo Fisher Scientific is establishing a total of $6.5 billion in credit capacity. This includes a $2.0 billion, 364-day senior unsecured bridge loan; a $2.0 billion, 3-year senior unsecured term loan; and a $2.5 billion, 5-year senior unsecured revolving credit facility. The specific amounts drawn and the interest rates will depend on market conditions and the company's credit ratings.

The credit agreements include financial covenants, primarily focusing on a consolidated indebtedness to consolidated EBITDA ratio (leverage ratio) and a minimum interest coverage ratio of 3.0 to 1.0. The leverage ratio covenants have step-down requirements, becoming more restrictive over time, and can be increased to 4.5 to 1.0 following a Qualified Acquisition. These covenants are designed to ensure the company maintains a healthy financial position.

These new credit lines significantly enhance the company's financial flexibility by providing substantial capital for strategic acquisitions like FEI, as well as for ongoing operational needs and capital investments. The diversified structure, including a bridge loan for immediate acquisition funding and a longer-term revolving credit facility for general purposes, allows management to execute its growth strategy while maintaining adequate liquidity.