Mastercard Inc. Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed by Mastercard Inc. on November 16, 2012. 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 borrowing capacity of $3,000,000,000. This facility replaces a prior $2,750,000,000 credit facility. 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 the aggregate revolving commitment from $2,750,000,000 to $3,000,000,000.
- Maturity Date: The new facility expires on November 16, 2017, extending the maturity compared to the prior facility which had staggered expirations in 2013 and 2014.
- Structure: The new agreement consolidates the credit line into a single five-year term.
Terms, Covenants, and Risks
The Credit Facility is available for general corporate purposes. Interest rates are based on LIBOR or an alternative base rate plus applicable margins, and a facility fee is charged, both fluctuating based on the Company's credit rating.
Material Covenants:
- Leverage Ratio: The Company must maintain a maximum consolidated leverage ratio (consolidated adjusted debt to consolidated EBITDA) of not greater than 3.50 to 1.00.
- Restrictions: The agreement limits the creation of liens (excluding liens not exceeding the lesser of $400,000,000 or 4% of consolidated total assets), fundamental changes, asset disposals outside the ordinary course (excluding sales not exceeding 25% of consolidated total assets in any 12-month period), affiliate transactions, and entry into new lines of business that would change the primary business.
- Prepayment: The Company may prepay, terminate, or reduce commitments at any time without penalty in minimum amounts of $10.0 million.
- Verify the current consolidated adjusted debt and EBITDA to ensure compliance with the 3.50 to 1.00 leverage covenant.
- Review the specific definitions of "consolidated adjusted debt" and "consolidated EBITDA" in the full Credit Agreement (Exhibit 10.1).
- Confirm the Company's current credit rating to determine the applicable interest rate margins and facility fees.
- Assess any planned asset disposals or new business ventures against the 25% asset sale limit and primary business change restrictions.
Related Party Considerations: 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.