Summary
United Parcel Service Inc. (UPS) filed an 8-K on April 16, 2009, announcing the entry into a new $3.0 billion 364-day revolving credit facility. This new facility replaces a previous $4.5 billion 364-day revolving credit facility that was set to expire on April 16, 2009. The primary purpose of this new credit line is to provide general corporate purposes and serve as a backstop for commercial paper.
Key Highlights
- 1UPS entered into a new $3.0 billion 364-day revolving credit facility, effective April 16, 2009.
- 2This new facility replaces a prior $4.5 billion 364-day revolving credit facility.
- 3The facility matures on April 15, 2010, with an option for renewal for an additional 364 days or conversion to a term loan maturing by April 15, 2011.
- 4Interest rates are based on LIBOR or a base rate, plus an applicable margin influenced by UPS's credit default swap spread and public debt ratings (S&P/Moody's).
- 5The facility includes covenants restricting secured indebtedness and sale-leaseback transactions, and requiring a minimum consolidated net worth of $5.0 billion.
- 6UPS is required to pay commitment fees on unused portions of the facility, ranging from 0.10% to 0.15% annually based on debt ratings.
Frequently Asked Questions
UPS entered into a new $3.0 billion 364-day revolving credit facility to replace an expiring $4.5 billion facility. This new facility provides continued access to liquidity for general corporate purposes, including acting as a backstop for its commercial paper program.
The facility is for $3.0 billion, has a 364-day term maturing on April 15, 2010, and offers options for renewal or conversion into a term loan. Interest rates are tied to LIBOR or a base rate, plus a margin that adjusts based on UPS's credit ratings and CDS spread. It also includes standard covenants and requires a minimum net worth of $5.0 billion.
Interest rates can be based on LIBOR plus an applicable margin, or a base rate plus a margin. The applicable margin is determined by UPS's 1-year credit default swap spread, with minimum and maximum percentages set based on its S&P and Moody's debt ratings. Higher credit ratings result in lower margins.
The facility imposes restrictions on incurring significant secured indebtedness, entering into certain sale-leaseback transactions, transferring substantially all assets, and merging or consolidating if UPS is not the surviving entity. It also mandates maintaining a minimum consolidated net worth of $5.0 billion.