8-KMaterial AgreementsFinancial Events

UNITED PARCEL SERVICE INC 8-K Report, Material Agreement (Mar 29, 2013)

Filed March 29, 2013For Securities:UPS

Summary

United Parcel Service Inc. (UPS) filed an 8-K on March 29, 2013, detailing the establishment of two new credit facilities, replacing existing ones. This strategic move aims to provide continued financial flexibility and support for general corporate purposes, including working capital. The company secured a new $1.5 billion 364-day revolving credit facility and a new $1.0 billion five-year revolving credit facility, both with JPMorgan Chase Bank, N.A. as administrative agent. These new facilities offer updated interest rate structures, including options for LIBOR-based or prime rate-based advances with applicable margins tied to credit default swap spreads and public debt ratings. The terms include covenants, events of default, and fees similar to previous agreements, emphasizing financial stability and operational continuity. Investors should note that these credit arrangements are crucial for UPS's liquidity management and its ability to fund ongoing operations and potential strategic initiatives.

Key Highlights

  • 1UPS established two new credit facilities on March 29, 2013: a $1.5 billion 364-day revolving credit facility and a $1.0 billion five-year revolving credit facility.
  • 2These new facilities replace previously existing credit lines that were set to expire in April 2013 and April 2017.
  • 3The new facilities provide flexibility in interest rate selection, including options based on LIBOR or prime rates, with margins influenced by credit default swap spreads and debt ratings.
  • 4JPMorgan Chase Bank, N.A. is the administrative agent for both new credit facilities.
  • 5The proceeds from these facilities are intended for working capital and general corporate purposes.
  • 6Both facilities contain customary covenants regarding corporate maintenance, financial compliance, and restrictions on secured indebtedness and sale-leaseback transactions.
  • 7The 364-day facility has an option to be converted into a term loan maturing by March 28, 2015, with specific fees and margin adjustments.

Frequently Asked Questions

The primary purpose of these new credit facilities is to provide United Parcel Service Inc. (UPS) with continued financial flexibility for working capital and general corporate and other lawful business purposes. They ensure adequate liquidity to support ongoing operations and strategic initiatives.

The new facilities replace older credit lines with similar aggregate amounts but offer updated terms, including more dynamic interest rate structures tied to market indicators like LIBOR and credit default swap spreads, as well as debt ratings. The maturity dates and extension options also differ, with a specific conversion option for the 364-day facility.

The total borrowing capacity provided by the new facilities is $2.5 billion, consisting of a $1.5 billion 364-day revolving credit facility and a $1.0 billion five-year revolving credit facility.

Yes, the new facilities include customary covenants such as maintaining corporate existence, complying with laws, paying taxes, and maintaining insurance. They also contain restrictions on incurring secured indebtedness beyond a certain threshold and entering into specific sale-leaseback transactions or mergers/consolidations where UPS is not the survivor.