8-KMaterial AgreementsFinancial EventsExhibits & Filings

WILLIAMS COMPANIES, INC. 8-K Report, Material Agreement (Jun 9, 2011)

Filed June 9, 2011For Securities:WMB

Summary

This Form 8-K filing from The Williams Companies, Inc. (WMB) on June 9, 2011, details the establishment of new, significant credit facilities for WMB, Williams Partners L.P. (WPZ), and WPX Energy, Inc. (WPX), all arranged with Citibank, N.A. as administrative agent. The primary purpose of these filings is to report the entry into these new material definitive agreements. These new credit facilities are designed to provide substantial financial flexibility for working capital, acquisitions, capital expenditures, and general corporate purposes for each entity. Key to investors is that these new agreements replace older credit facilities, indicating a refinancing or modernization of the companies' debt structures. The terms include initial committed amounts ranging from $900 million for WMB to $2 billion for WPZ and $1.5 billion for WPX, with options for up to $250 million, $400 million, and $300 million in increases, respectively. The covenants within these agreements, particularly concerning debt-to-EBITDA and debt-to-capitalization ratios, are crucial for understanding the financial health and operational constraints of each company. The specific ratio requirements vary by entity and are tied to factors like acquisitions and credit ratings, offering insight into potential triggers for increased financial scrutiny or limitations.

Key Highlights

  • 1Williams Companies, Inc. (WMB) secured a new $900 million, five-year senior unsecured revolving credit facility, expandable by up to $250 million.
  • 2Williams Partners L.P. (WPZ) established a new $2 billion, five-year senior unsecured revolving credit facility, expandable by up to $400 million, with sub-limits for Transco and Northwest.
  • 3WPX Energy, Inc. (WPX) entered into a new $1.5 billion, five-year senior unsecured revolving credit facility, expandable by up to $300 million, including a $125 million swingline loan option.
  • 4All three new credit facilities replace existing agreements, indicating a restructuring of the companies' debt and liquidity arrangements.
  • 5The credit facilities are unsecured and have a five-year term, providing medium-term financial flexibility.
  • 6Financial covenants, such as debt-to-EBITDA and debt-to-capitalization ratios, are key provisions and vary across WMB, WPZ, and WPX, with specific thresholds tied to acquisitions and credit ratings.
  • 7The WPX Energy credit facility is contingent on the completion of its initial public offering (IPO) by November 30, 2011.

Frequently Asked Questions

The new credit facilities for Williams Companies (WMB), Williams Partners L.P. (WPZ), and WPX Energy, Inc. (WPX) are primarily intended to provide working capital, fund acquisitions and capital expenditures, and support other general corporate purposes. They effectively replace older credit agreements, indicating a modernization of the companies' borrowing capabilities and financial flexibility.

The financial covenants, such as debt-to-EBITDA or debt-to-capitalization ratios, set limits on the amount of debt each company can carry. For WMB and WPZ, these ratios are tested quarterly and can be stricter if significant acquisitions occur. WPX has specific ratios related to proven reserves (PV to debt) and capitalization prior to achieving investment-grade status. Breaching these covenants could lead to events of default, potentially triggering accelerated repayment of debt.

No, all three credit facilities—for WMB, WPZ, and WPX—are explicitly described as senior unsecured revolving credit facilities. This means they are not backed by specific collateral, which is typical for larger, established corporate entities.

The WPX Energy credit facility is not effective until certain conditions are met, most notably the completion of WPX's initial public offering (IPO) by November 30, 2011. This indicates that WPX Energy was in the process of being spun off or taken public at the time of this filing, and its access to this credit line was contingent on successfully completing that separation.