8-KFinancial EventsExhibits & Filings

UNITED PARCEL SERVICE INC 8-K Report, Financial Obligation (Oct 23, 2007)

Filed October 23, 2007For Securities:UPS

Summary

On October 19, 2007, United Parcel Service, Inc. (UPS) entered into a new $7.0 billion revolving credit facility, referred to as the "Backstop Facility." This facility, arranged with a syndicate of banks and financial institutions with Citibank, N.A. acting as administrative agent, provides UPS with significant liquidity. The facility matures on October 17, 2008, and is intended for general corporate purposes, including providing a backstop for commercial paper. While this facility offers financial flexibility, investors should note the short-term nature of the maturity date. The agreement includes standard covenants and events of default, typical for such credit arrangements, and involves certain fees and interest rates tied to base or Eurocurrency rates (LIBOR + 0.135%). The agreement also imposes restrictions on incurring certain secured indebtedness and engaging in sale-leaseback transactions.

Key Highlights

  • 1UPS secured a new $7.0 billion revolving credit facility, named the "Backstop Facility."
  • 2The facility was established on October 19, 2007, with a syndicate of banks, led by Citibank, N.A. as the administrative agent.
  • 3The primary purpose of the Backstop Facility is for general corporate purposes, including acting as a backstop for commercial paper issuance.
  • 4The credit facility has a relatively short maturity date of October 17, 2008.
  • 5Interest rates are based on either a fluctuating "base rate" or a "Eurocurrency rate" (LIBOR plus a 0.135% margin).
  • 6UPS is required to pay an annual facility fee of 0.015% on the aggregate commitment.
  • 7The agreement contains customary covenants, restrictions on secured debt and sale-leaseback transactions, and standard events of default.

Frequently Asked Questions

The Backstop Facility is intended for general corporate purposes, with a specific mention of providing a backstop for UPS's commercial paper program. This indicates UPS is securing liquidity to manage its short-term financing needs and maintain financial flexibility.

The Backstop Facility matures on October 17, 2008. While it provides immediate access to funds, the relatively short maturity (less than a year from the filing date) might suggest a need for a more long-term financing solution or a potential refinancing effort in the near future.

Borrowings can be made at either a "base rate" (fluctuating) or a "Eurocurrency rate," which is LIBOR for the selected interest period plus a margin of 0.135%. Interest payments are made quarterly in arrears for base rate advances and at the end of each interest period (or every three months for longer periods) for Eurocurrency rate advances.

Yes, the facility includes customary covenants related to corporate existence, compliance with laws, and taxes. It also restricts UPS from incurring certain secured indebtedness without equally securing the Backstop Facility lenders and from entering into certain sale-leaseback transactions. Standard events of default, such as non-payment, covenant breaches, insolvency, and change of control, are also included.