Mastercard Inc. Form 8-K Summary
Business Context and Reporting Period
This Current Report (Form 8-K) was filed by Mastercard Incorporated on November 22, 2010. The filing discloses the entry into a material definitive agreement regarding a new credit facility.
Key Financial Metrics and Liquidity
The filing details the establishment of a new committed three-year unsecured revolving credit facility with a total capacity of $2,750,000,000. This facility replaces a prior $2,000,000,000 facility that was set to expire on April 26, 2011. The new agreement expires on November 22, 2013. Borrowings are available for general corporate purposes. Interest rates are based on LIBOR or an alternative base rate plus applicable margins, and a facility fee is payable based on the Company's credit rating.
The filing does not provide specific values for revenue, profit, cash flow, margins, or current debt levels outside of the new facility terms.
Material Changes and Covenants
The primary material change is the increase in committed credit capacity from $2.0 billion to $2.75 billion and the extension of the maturity date. The agreement includes the following material terms:
- Financial Covenant: The Company must maintain a maximum consolidated leverage ratio (consolidated adjusted debt to consolidated EBITDA) of not greater than 3.50 to 1.00.
- Restrictive Covenants: Limits on creating liens (excluding liens not exceeding the lesser of $300 million or 3% of consolidated total assets), fundamental changes, asset disposals (excluding sales not exceeding 25% of consolidated total assets in any 12-month period), affiliate transactions, and entering new lines of business.
- Prepayment: The Company may prepay, terminate, or reduce commitments at any time without penalty in minimum amounts of $10.0 million.
Outlook, Risks, and Unusual Items
The filing notes that the majority of the Credit Facility lenders are members or affiliates of members of MasterCard International Incorporated. These lenders may provide commercial and investment banking services to the Company for customary fees. The agreement contains customary events of default which could allow lenders to accelerate outstanding loans and terminate commitments.
Key Facts for Investor Verification
- Verify the Company's current consolidated adjusted debt and EBITDA to ensure compliance with the 3.50 to 1.00 leverage ratio covenant.
- Confirm the identity of the lenders and the extent of their affiliation with MasterCard International Incorporated.
- Review the full text of the Credit Agreement (Exhibit 10.1) for specific definitions of "consolidated adjusted debt" and "consolidated EBITDA."
- Monitor future asset disposals to ensure they do not exceed the 25% threshold of consolidated total assets within any 12-month period.