What is the primary purpose of the $25.0 billion Delayed Draw Term Loan Credit Agreement?

The primary purpose of the $25.0 billion Delayed Draw Term Loan Credit Agreement is to provide Verizon with significant financial flexibility for general corporate purposes, which specifically includes the potential acquisition of wireless spectrum.

How much did Verizon pay for the C-Band spectrum licenses, and when are the payments due?

Verizon's subsidiary, Cellco Partnership, was the winning bidder for approximately $45.5 billion of C-Band wireless spectrum licenses. Down payments (20% of cost minus upfront payments) are due by March 10, 2021, and final payments (80% of cost) are due by March 24, 2021. Additionally, licensees must pay their allocable shares of estimated clearing and incentive costs.

What is the maturity date of the loans under the new credit agreement?

The loans under the Delayed Draw Term Loan Credit Agreement are to be made in a single borrowing and will mature and be payable in full on the date that is 364 days after the funding date, unless extended according to the agreement's terms.

Does Verizon have to use its own funds to repay this loan, or can it refinance?

The Credit Agreement requires Verizon to reduce unused commitments and prepay the loans with 100% of the net cash proceeds received from issuances or sales of equity and incurrences of borrowed money indebtedness, subject to certain exceptions. This indicates a requirement to use new capital raises to repay the loan.

VZ 8-K: Material Agreements

Summary

Verizon Communications Inc. has filed an 8-K report detailing two significant financial events. Primarily, the company entered into a $25.0 billion Delayed Draw Term Loan Credit Agreement on February 24, 2021, with JPMorgan Chase Bank, N.A. and Morgan Stanley Senior Funding, Inc. This facility provides substantial liquidity, available for general corporate purposes, including potential spectrum acquisitions, and has an availability period extending to May 28, 2021. The loans mature 364 days after funding, offering short-term financial flexibility. In conjunction with this, Verizon also announced its significant success in FCC Auction 107, securing approximately $45.5 billion in C-Band wireless spectrum licenses through its subsidiary Cellco Partnership. The substantial capital outlay for these crucial licenses is due in installments in March 2021, with down payments on March 10 and final payments on March 24, along with associated clearing costs. The combination of securing substantial debt financing and winning vital spectrum assets positions Verizon to bolster its 5G network capabilities.

Key Highlights

1Verizon secured a $25.0 billion Delayed Draw Term Loan Credit Agreement to enhance financial flexibility for general corporate purposes, including spectrum acquisition.
2The credit facility has an availability period through May 28, 2021, with loans maturing 364 days after funding, indicating short-term borrowing capacity.
3Verizon's subsidiary, Cellco Partnership, was the winning bidder for approximately $45.5 billion in C-Band wireless spectrum licenses in FCC Auction 107.
4Significant payments for the acquired spectrum licenses are due in March 2021, with down payments by March 10 and final payments by March 24.
5The credit agreement includes customary covenants and events of default for an investment-grade rated company.
6The interest rate on the term loan will vary based on Verizon's credit rating, with margins ranging from 0.000% to 0.125% for base rate loans and 0.625% to 1.125% for LIBOR loans, plus an additional 0.125% margin from December 31, 2021.
7Verizon is required to use a significant portion of net proceeds from equity issuances or new debt to prepay the term loan, subject to certain exceptions.

VERIZON COMMUNICATIONS INC 8-K Report, Material Agreement (Feb 24, 2021)

Summary

Key Highlights

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