8-KMaterial AgreementsFinancial EventsRegulation FD+1

Trane Technologies plc 8-K Report, Material Agreement (Mar 26, 2019)

Filed March 26, 2019For Securities:TT

Summary

Trane Technologies plc (TT), through its subsidiary Ingersoll-Rand Luxembourg Finance S.A., has issued a significant amount of senior unsecured notes totaling $1.5 billion to finance the proposed acquisition of Precision Flow Systems. The notes consist of $400 million in 3.500% Senior Notes due 2026, $750 million in 3.800% Senior Notes due 2029, and $350 million in 4.500% Senior Notes due 2049. The proceeds will primarily fund the acquisition, with remaining amounts for offering expenses and general corporate purposes. This financing move indicates a strategic step towards growth and expansion, signaled by the acquisition of Precision Flow Systems. Investors should note the increased interest expense expected, approximately $60 million annually on a full-year basis, with an estimated $47 million impact for 2019 due to the timing of the issuance. The notes carry standard covenants and provisions, including a change of control clause and mandatory redemption obligations if the acquisition does not close by January 31, 2020.

Key Highlights

  • 1Issuance of $1.5 billion in aggregate principal amount of Senior Notes across three tranches (2026, 2029, and 2049 maturities).
  • 2Primary use of proceeds is to finance the proposed acquisition of Precision Flow Systems.
  • 3Notes are senior unsecured obligations of the Issuer and rank equally with existing and future senior unsecured indebtedness.
  • 4Guarantees of the Notes are senior unsecured obligations of the Guarantors and rank equally with their existing and future senior unsecured indebtedness.
  • 5Expected annual increase in interest expense of approximately $60 million (pre-tax), with a $47 million impact in 2019.
  • 6Mandatory redemption at 101% of principal plus accrued interest if the Precision Flow Systems acquisition does not close by January 31, 2020.
  • 7Includes customary covenants limiting liens and sale and leaseback transactions, and provisions for change of control events.

Frequently Asked Questions

The primary purpose of the $1.5 billion senior notes issuance is to fund the proposed acquisition of Precision Flow Systems. Remaining proceeds will cover offering expenses and general corporate purposes.

The company expects an increase in annual interest expense by approximately $60 million before taxes. For the year 2019, the impact is estimated to be around $47 million due to the timing of the financing in March.

If the acquisition of Precision Flow Systems is not completed by January 31, 2020, or if the offer to acquire is terminated prior to that date, Trane Technologies will be obligated to redeem all of the issued notes at a price of 101% of their principal amount, plus accrued interest.

The notes are senior unsecured obligations of the Issuer (Ingersoll-Rand Luxembourg Finance S.A.) and rank equally with all of the Issuer's existing and future senior unsecured indebtedness. The guarantees provided by the parent and other subsidiaries are also senior unsecured obligations, ranking equally with their respective senior unsecured indebtedness.