Business Context and Reporting Period
Company: Oracle Corporation
Filing Type: Form 8-K (Current Report)
Date of Report: March 15, 2006
Event: Entry into a new material definitive agreement regarding corporate financing.
Key Financial Metrics and Obligations
- New Facility: $3,000,000,000 5-Year Revolving Credit Agreement.
- Purpose: Backstop for commercial paper issuance, working capital, and general corporate purposes.
- Interest Basis: LIBOR-based formula, Wachovia prime rate, or federal funds effective rate.
- Letters of Credit: Up to $500,000,000 available.
- Currency Options: Borrowings and letters of credit may be in Japanese Yen, Pounds Sterling, and Euros (up to $1,500,000,000).
- Expansion Option: Commitments may be increased to $5,000,000,000 with lender agreement.
- Current Utilization: $0 (No funds borrowed as of the filing date).
- Maturity Date: March 14, 2011.
Material Changes Versus Prior Period
The New Credit Agreement replaces the existing $3,000,000,000 364-day Revolving Credit Agreement dated March 18, 2005. Oracle terminated all commitments under the prior agreement on March 15, 2006, which otherwise would have expired on March 17, 2006. The primary change is the extension of the facility term from 364 days to 5 years.
Management Commentary, Risks, and Covenants
- Financial Covenants: The agreement requires Oracle's total net debt to total capitalization ratio not to exceed 45%.
- Events of Default: Includes standard representations and warranties. If an event of default occurs and is not cured within applicable grace periods, unpaid amounts may be declared immediately due and payable, and commitments may be terminated.
- Related Parties: Certain lenders or their affiliates provide investment banking, trustee, cash management, foreign exchange, and brokerage services to Oracle.
Investor Verification Checklist
- Verify the full text of the New Credit Agreement filed as Exhibit 10.4 for specific default conditions and fee structures.
- Confirm Oracle's current total net debt to total capitalization ratio to ensure compliance with the 45% covenant.
- Monitor future commercial paper issuance to determine if the new facility is utilized as a backstop.
- Review the list of lenders to assess concentration risk given the multiple service relationships noted.