Business Context and Reporting Period
Company: Mastercard Incorporated
Filing Type: Form 8-K (Current Report)
Date of Report: November 15, 2018
Event: Entry into a Material Definitive Agreement (Revolving Credit Facility)
Key Financial Metrics and Debt Structure
This filing details the establishment of a new credit facility rather than reporting operational financial results (revenue, profit, or cash flow) for a specific period.
- New Credit Facility: $4.5 billion committed, five-year unsecured revolving credit facility.
- Expiration Date: November 15, 2023.
- Purpose: General corporate purposes; borrowings available in U.S. dollars and/or Euros.
- Interest Rate: LIBOR or alternative base rate plus applicable margins based on issuer rating.
- Financial Covenant: Maximum consolidated leverage ratio of 3.75 to 1.00 (Consolidated Adjusted Debt to Consolidated EBITDA).
- Covenant Step-Up: Ratio may increase to 4.25 to 1.00 for two quarters following an acquisition exceeding $300 million.
Material Changes Versus Prior Period
The new facility amends and restates the Company's prior credit facility with the following changes:
- Capacity Increase: Increased from $3.75 billion to $4.5 billion.
- Term Extension: Extended expiration from October 19, 2022, to November 15, 2023.
- Lenders: The majority of lenders are customers or affiliates of customers of Mastercard International Incorporated.
Guidance, Risks, and Restrictive Covenants
The filing outlines specific restrictive covenants and risks associated with the new agreement:
- Liens: Limited ability to create liens, with exceptions for liens not exceeding the greater of $600 million or 4% of consolidated total assets.
- Asset Disposal: Restricted from disposing of assets outside the ordinary course of business, excluding sales not exceeding 25% of consolidated total assets in any 12-month period.
- Fundamental Changes: Restrictions on mergers, sales of substantially all assets, or liquidation.
- Prepayment: The Company may prepay, terminate, or reduce commitments at any time without penalty in minimum amounts of $10.0 million.
- Related Party Transactions: Certain lenders provide commercial and investment banking services to the Company for customary fees.
Investor Verification Checklist
- Verify the current consolidated leverage ratio to ensure compliance with the 3.75 to 1.00 covenant.
- Monitor any planned acquisitions exceeding $300 million that would trigger the leverage ratio step-up to 4.25 to 1.00.
- Review the Company's total debt load to assess the utilization of the new $4.5 billion facility versus existing obligations.
- Confirm the impact of the facility fee fluctuations based on the Company's credit rating.