Business Context and Reporting Period
Company: Commercial Metals Company
Filing Type: Form 8-K (Current Report)
Date of Report: May 18, 2011
Event: Entry into a Material Definitive Agreement (Interest Rate Swap Transaction).
Key Financial Metrics and Transaction Details
This filing does not report revenue, profit, cash flow, or general liquidity metrics. It details a specific debt management transaction:
- Underlying Debt: 6.50% Senior Notes due 2017 (Total Principal: $400,000,000).
- Swap Notional Amount: $300,000,000 (75% of the total note principal).
- Transaction Purpose: Convert fixed-rate interest to floating-rate interest.
- Effective Date: May 20, 2011.
- Termination Date: July 15, 2017.
- Counterparty: Goldman Sachs Bank USA (GSB), guaranteed by The Goldman Sachs Group, Inc.
- Payment Structure: Company pays semiannual floating rate (6-month LIBOR in arrears); GSB pays semiannual fixed rate.
- Resulting Cost of Borrowing: Floating LIBOR rate plus 374 basis points.
Material Changes Versus Prior Period
The filing does not provide comparative financial data or discuss changes in operating performance versus prior periods. The material change is the alteration of the interest rate profile for $300,000,000 of the Company's debt from a fixed 6.50% rate to a variable rate based on LIBOR plus 374 basis points.
Guidance, Outlook, and Risks
Management Commentary: The Company entered the swap to modify its interest rate exposure. The filing notes that Goldman Sachs affiliates have provided and may continue to provide investment banking and financial advisory services for which they receive customary fees.
Risks and Contingencies: The transaction exposes the Company to floating rate risk (LIBOR fluctuations) on the $300,000,000 notional amount. The filing incorporates by reference the ISDA Master Agreement and Guarantee, which contain customary representations, warranties, and covenants.
Important Facts for Investor Verification
- Verify the current 6-month LIBOR rate to calculate the immediate effective interest cost (LIBOR + 3.74%) compared to the previous fixed 6.50% rate.
- Confirm the total outstanding balance of the 6.50% Senior Notes due 2017 to ensure the $300,000,000 swap coverage remains accurate.
- Review the Company's overall debt maturity schedule to assess the impact of floating rates on future cash flow projections.
- Check for any subsequent filings regarding the termination or modification of this swap agreement prior to the July 15, 2017 maturity.