8-KMaterial AgreementsFinancial Events

UNITED PARCEL SERVICE INC 8-K Report, Material Agreement (Mar 28, 2014)

Filed March 28, 2014For Securities:UPS

Summary

United Parcel Service Inc. (UPS) filed an 8-K on March 28, 2014, detailing the entry into new credit facilities. The company entered into a $1.5 billion 364-day revolving credit facility and an amended and restated $1.0 billion five-year revolving credit facility, both with JPMorgan Chase Bank, N.A. as the administrative agent. These new facilities replace previously existing credit lines, indicating a strategic move to update and potentially optimize UPS's financing structure. The primary purpose of these new credit facilities is for working capital and general corporate purposes. The reporting highlights the key terms, including interest rate mechanisms (LIBOR or prime rate plus applicable margins), fee structures (unused commitment fees, administrative fees), covenants, and events of default. Investors should note the company's ability to extend the 364-day facility and seek extensions for the five-year facility, as well as options for converting the 364-day facility into a term loan, demonstrating flexibility in managing its debt obligations.

Key Highlights

  • 1UPS entered into two new credit facilities: a $1.5 billion 364-day revolving credit facility and a $1.0 billion five-year revolving credit facility.
  • 2These new facilities, both with JPMorgan Chase Bank, N.A. as administrative agent, replace previous credit lines.
  • 3The proceeds from these facilities are intended for working capital and general corporate purposes.
  • 4Interest rates are based on LIBOR or prime rate, with applicable margins tied to UPS's credit default swap spread.
  • 5The company has options to extend the maturity of both facilities under certain conditions.
  • 6The 364-day facility offers an option to convert outstanding amounts into a term loan with specific terms.
  • 7Standard covenants, restrictions, and events of default customary for such credit agreements are in place.

Frequently Asked Questions

UPS has secured a total of $2.5 billion in new credit facilities, comprising a $1.5 billion 364-day revolving credit facility and a $1.0 billion five-year revolving credit facility.

The proceeds from both the 364-day and the five-year revolving credit facilities are designated for working capital and other general corporate and lawful business purposes.

Interest rates are determined either by a fixed rate based on LIBOR for the applicable interest period plus an applicable margin, or a fluctuating rate based on a prime rate, the federal funds effective rate, or LIBOR, plus an applicable margin. The applicable margin for LIBOR-based advances is tied to UPS's 1-year credit default swap spread, with minimum and maximum rates.

Yes, UPS has the option to request extensions for both facilities. The 364-day facility can be extended for an additional 364-day period, and the five-year facility can be extended annually. However, these extensions are subject to lender approval and specific conditions.