Summary
Zoetis Inc. (ZTS) has entered into a $500 million senior unsecured revolving credit facility with a 364-day maturity. This new credit agreement, effective July 27, 2018, provides financial flexibility and is set to mature shortly after the one-year mark, with an option to convert outstanding loans into term loans. The facility is structured to be flexible, allowing for prepayments without penalty and offering interest rate options based on either a base rate or a Eurodollar rate, plus applicable margins that are tied to Zoetis's public debt ratings. A key immediate use of this credit facility was to finance a portion of the cash consideration for the previously announced acquisition of Abaxis, Inc., which closed on July 30, 2018. The agreement includes financial covenants such as a maximum total leverage ratio and a minimum interest coverage ratio, alongside customary affirmative and negative covenants. This move signals Zoetis's strategic use of debt financing to support growth initiatives and manage liquidity.
Key Highlights
- 1Zoetis secured a new $500 million, 364-day senior unsecured revolving credit facility.
- 2The credit agreement allows for the conversion of revolving loans into one-year term loans upon maturity.
- 3The facility provides flexibility with options for base rate or Eurodollar rate interest, subject to applicable margins and a facility fee.
- 4The credit line was immediately utilized to partially fund the acquisition of Abaxis, Inc.
- 5The agreement includes financial covenants: maximum total leverage ratio and minimum interest coverage ratio.
- 6Customary affirmative and negative covenants are in place, restricting certain corporate actions.
- 7The credit facility is not guaranteed by Zoetis's subsidiaries.