Item 1.01. Conclusion of a significant definitive agreement.
On August 17, 2022, Cummins inc. (the “Company”) has entered into a fourth amended and restated 364 Day Credit Agreement (the “364 Day Credit Agreement”) by and between the Company, certain of its subsidiaries (together with the Company, the “Borrowers”) , the lenders named therein (the “364-Day lenders“) and JPMorgan Chase Bank, North America. (“JPMorgan”), as administrative agent. Under the 364 Day Credit Agreement, borrowers may obtain revolving loans and variable credit loans, in each case subject to certain amount limits, in an amount of up to $1.5 billion in total outstanding at any time before August 16, 2023 (the “Commitment Termination Date”). The 364 Day Credit Agreement amends and reaffirms in its entirety that certain third amended and restated 364 Day Credit Agreements, dated August 18, 2021by and between the Company, certain subsidiaries therein, the lenders therein and JPMorgan, as administrative agent.
On August 17, 2022the Company has also entered into a 364-day Incremental Credit Agreement (the “Incremental Credit Agreement”, together with the 364-day Credit Agreement, the “New Credit Agreements”) by and between the Company, the other Borrowers parties thereto, the lenders named therein (the “Incremental Lenders” and together with the 364-Day lenders, the “Lenders”) and JPMorgan, as administrative agent. Under the Incremental Credit Agreement, Borrowers may obtain revolving loans of up to $500 million in the aggregate outstanding at any time prior to the date of termination of the undertaking.
Under the New Credit Agreements, the August 17, 2022the Company has also entered into Amendment No. 1 to the Amended and Restated Credit Agreement (the “Amendment”) by and between the Company, the other Borrowers parties thereto, the 5-year Lenders (such as defined below) named therein and JPMorgan, as administrative agent, amending said Amended and Restated Credit Agreement, dated August 18, 2021 (the “Existing 5 Year Credit Agreement”, the Existing 5 Year Credit Agreement as amended by the Amendment, the “5 Year Credit Agreement” and the 5 Year Credit Agreement and the New Agreements agreement, collectively, the “Credit Agreements”), by and between the Company, the other Borrowers parties thereto, the lenders named therein (the “5 Year Lenders”) and JPMorgan, as administrative agent, to, among other things, replace LIBOR with SOFR as the interest rate reference and to make other changes consistent with interest rate determinations, as further described below.
Borrowings under the New Credit Agreements will not be secured by liens on any of the assets of the Company or its subsidiaries. The Company will guarantee all loans contracted by Subsidiary Borrowers under the New Credit Agreements.
The Company may from time to time request additional term loans and/or increase the maximum availability under the 364 Day Credit Agreement up to $750 million if certain conditions are satisfied, including (i) the absence of default or event of default under the 364-Day Credit Agreement, and (ii) the Company obtaining the consent of the 364-DayDay lenders participating in each of these increases. In addition, prior to the Commitment Termination Date, the Company may, by notice to the relevant administrative agent and subject to certain other conditions set forth in the applicable New Credit Agreement, including the absence of any default or event of default thereunder, elect to convert all or a pro rata portion of the outstanding Revolving Loans under either of the New Credit Agreements into Term Loans (the “Option to expiry”) which will expire on the first anniversary of the date of termination of the commitment. Borrowers will pay a fee to applicable Lenders equal to 0.5% of the aggregate principal amount of outstanding revolving loans converted to term loans under the Maturity Option.
Borrowings under the Credit Agreements will bear interest at variable rates, depending on the type of loan and, in certain cases, the rates of the designated benchmarks and the choice of the applicable borrower. For all borrowings under the Credit Agreements, the Borrower concerned may choose among the following interest rates: (i) only in the event of WE dollar-denominated loans, an interest rate (the “Alternate Base Rate”) equal to the greater of (1) the prime rate in effect from time to time, (2) the greater of (A) the effective rate Federal Funds Funds Rate in effect from time to time and (B) the Overnight Bank Funding Rate in effect from time to time, in each case plus 0.5% and (3) the Adjusted Forward SOFR Rate for a period one month interest plus 1.00%; (ii) an interest rate equal to (1) only in the case of WE reference term loans denominated in dollars, the SOFR term adjusted rate or (2) only in the case of reference term loans denominated in euros, the EURIBO rate adjusted, as the case may be, in each case for the period of applicable interest plus a rate between (x) 0.50% to 1.00% in the case of the 5-year Credit Agreement and (y) 0.45% to 0.875% in the case of the New Agreements of Credit, in each case based on the credit rating of the Company’s senior unsecured long-term securities. term debt (the “Applicable Rate”), (iii) only in the case of sterling or WE dollar-denominated loans, the Simple Daily Adjusted RFR plus the Applicable Rate; or (iv) only in the case of swingline loans available under the 364 Day Credit Agreement and the 5 Year Credit Agreement, an interest rate equal to (1) only in the case of WE
dollar-denominated swingline loans, the Alternate Base Rate, (2) only in the case of euro-denominated swingline loans, Daily Simple ESTR plus the applicable rate, (3) only in the case of sterling-denominated swingline loans, Daily Simple SONIA plus the Applicable Rate, or (4) another rate agreed by 364-Day lender or the lender over 5 years and the borrower concerned. Currently, the Company’s senior unsecured long-term debt is rated A2 by Moody’s Investors Service, Inc. and A+ by Standard & Poor’s Financial Services LLC, which would result in an applicable rate of (x) 0.75% under the 5-year credit agreement and (y) 0.625% under the new credit agreements, in each case for the purposes of points (ii ) to (iv) above, as applicable. Credit ratings are not purchase recommendations and are subject to change, and each rating should be evaluated independently of any other rating. Further, the Company assumes no obligation to update information regarding its credit ratings, whether as a result of new information, future events or otherwise.
The New Credit Agreements contain customary events of default and financial and other covenants, including a financial covenant requiring that the ratio of the consolidated net debt of the Company and its subsidiaries to the total consolidated capital of the Company and its subsidiaries on the last day of each fiscal quarter must not exceed 0.65:1.
The description of each New Credit Agreement and Amendment set forth above is qualified by reference to the 364 Day Credit Agreement, Incremental Credit Agreement and Amendment, as applicable, filed with present as exhibits 10.1, 10.2 and 10.3, respectively, and incorporated herein by reference.
Section 2.03. Creation of a Direct Financial Obligation or an Obligation under a
Off-Balance Sheet Arrangement of a Registrant.
The information included in Section 1.01 above is incorporated herein by reference.
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