Business Context and Reporting Period
This Form 8-K Current Report was filed by Becton, Dickinson and Company (BD) on February 4, 2016, regarding events occurring on January 29, 2016. The filing details the restructuring of the company's primary credit facilities.
Key Financial Metrics and Agreements
- New Credit Facility: Entered into a Five Year Credit Agreement providing a senior unsecured revolving credit facility of $1.5 billion.
- Expansion Option: BD may access up to an additional $500 million, bringing the maximum aggregate commitment to $2 billion.
- Subfacility: Includes a $100 million letter of credit subfacility.
- Term: The agreement expires in January 2021.
- Financial Covenant: Requires BD to maintain an interest expense coverage ratio of not less than 5-to-1 for the most recent four consecutive fiscal quarters.
- Usage: Borrowings are designated for general corporate purposes.
Material Changes Versus Prior Period
BD terminated its prior $1 billion credit agreement dated May 18, 2012, upon the effectiveness of the new agreement. There were no outstanding borrowings under the terminated agreement at the time of termination. The new agreement introduces multi-currency borrowing provisions and the $100 million letter of credit subfacility, which were not present in the prior agreement.
Outlook, Risks, and Contingencies
Interest rates on borrowings will be based on prevailing rates and BD's credit ratings. The agreement contains customary events of default, including non-payment of principal or interest and breaches of covenants. If an event of default occurs and is not cured within the applicable grace period, lenders holding a majority of commitments may accelerate outstanding loans and terminate their commitments.
Investor Verification Checklist
- Verify the full text of the Five Year Credit Agreement (Exhibit 10) for specific interest rate spreads and fees.
- Confirm BD's current credit ratings to understand the applicable interest rate tiers.
- Review recent quarterly reports to ensure compliance with the 5-to-1 interest expense coverage ratio covenant.
- Monitor future filings for any utilization of the $500 million accordion expansion feature.