Mastercard Inc. Form 8-K Summary
Business Context and Reporting Period
This Current Report (Form 8-K) was filed by Mastercard Inc. on October 21, 2015. The filing discloses the entry into a material definitive agreement regarding the company's corporate credit facilities.
Key Financial Metrics and Liquidity
The filing details the establishment of a new committed five-year unsecured revolving credit facility with a total capacity of $3,750,000,000. This facility replaces a prior $3,000,000,000 credit facility. Borrowings are available in U.S. dollars and Euros for general corporate purposes. The filing does not provide specific values for revenue, profit, cash flow, margins, or existing debt levels as of the reporting date.
Material Changes Versus Prior Period
- Facility Size: Increased borrowing capacity from $3,000,000,000 to $3,750,000,000.
- Maturity Date: Extended the expiration date from November 14, 2019, to October 21, 2020.
- Structure: Amended and restated the prior credit agreement with a syndicate of lenders including Citibank, N.A., and JPMorgan Chase Bank, N.A.
Terms, Covenants, and Risks
The new Credit Facility includes specific financial and restrictive covenants:
- Financial Covenant: Requires the maintenance of a maximum consolidated leverage ratio (consolidated adjusted debt to consolidated EBITDA) of not greater than 3.50 to 1.00.
- Restrictive Covenants: Limit the company's ability to create liens (with exceptions up to $400 million or 4% of total assets), effect fundamental changes (mergers, liquidations), dispose of assets outside the ordinary course (limit of 25% of total assets in 12 months), engage in non-fair affiliate transactions, or enter new primary lines of business.
- Interest and Fees: Borrowings bear interest at LIBOR or an alternative base rate plus applicable margins based on the company's credit rating. A facility fee is also payable, fluctuating based on the rating.
- Prepayment: The company may prepay, terminate, or reduce commitments at any time without penalty in minimum amounts of $10.0 million.
- Related Parties: The majority of lenders are customers or affiliates of customers of Mastercard International Incorporated. These lenders may provide commercial and investment banking services to the company for customary fees.
Investor Verification Checklist
- Verify the current consolidated adjusted debt and EBITDA figures to assess compliance with the 3.50 to 1.00 leverage ratio covenant.
- Review the full text of the Credit Agreement (Exhibit 10.1) for detailed definitions of "consolidated adjusted debt" and "EBITDA."
- Confirm the company's current credit rating to determine the applicable interest rate margins and facility fees.
- Assess the impact of the restrictive covenants on potential future acquisitions or asset dispositions.