Business Context and Reporting Period
Otis Worldwide Corporation filed this Form 8-K on November 12, 2021. The filing concerns financing for Otis’s proposed acquisition of the remaining shares of Zardoya Otis, S.A. and the related termination of interim financing and guarantee arrangements.
Key Financial and Financing Information
- Otis subsidiary Highland Holdings S.à r.l. issued €1.6 billion aggregate principal amount of unsecured, unsubordinated notes:
- €500 million of 0.000% notes due November 12, 2023.
- €600 million of 0.318% notes due December 15, 2026.
- €500 million of 0.934% notes due December 15, 2031.
- The notes are fully and unconditionally guaranteed by Otis on an unsecured, unsubordinated basis.
- Estimated net proceeds were approximately €1.6 billion, or $1.8 billion based on the euro/U.S. dollar exchange rate as of October 29, 2021, after underwriting discounts and offering expenses.
- Otis intends to use the proceeds to purchase Zardoya shares in the tender offer or otherwise, and to pay related fees and expenses.
- The filing does not provide operating revenue, profit, cash flow, margin, or liquidity figures for the reporting period.
Material Changes Versus the Prior Comparable Period
- The filing is transaction-focused and does not present period-over-period operating results.
- On November 12, 2021, after placing the note proceeds and cash on hand into a segregated account, OSH terminated the guarantees issued to the Spanish securities regulator, the CNMV.
- Otis and OSH also voluntarily terminated the remaining commitments under the €1.65 billion Bridge Loan Credit Agreement and the related Guarantees Issuance Agreement.
- The tender offer price had been adjusted from €7.00 to €6.93 per Zardoya share following Zardoya’s October 11, 2021 dividend.
Guidance, Outlook, Risks, and Unusual Items
- The tender offer remains subject to approval by the CNMV, and the filing does not state that the acquisition had closed.
- The notes may be redeemed under specified conditions, including certain tax-law developments.
- Following a Change of Control Triggering Event, noteholders may have the right to require repurchase of their notes at 101% of principal amount plus accrued and unpaid interest, subject to the terms of the indenture.
- The notes and Otis guarantees rank equally with existing and future unsecured, unsubordinated indebtedness of the respective obligors.
- Several financing participants and their affiliates have provided, and may continue to provide, financial services to Otis and its subsidiaries for customary fees, creating potential conflicts that investors should consider.
Important Facts for Investors to Verify
- CNMV approval status and whether the Zardoya tender offer was completed.
- The final number of Zardoya shares acquired and total acquisition cost.
- Use of the approximately €1.6 billion net note proceeds and any remaining cash requirements.
- The impact of the new notes on Otis’s total debt, interest expense, leverage, and credit metrics.
- The complete redemption, change-of-control, covenant, and guarantee provisions in the prospectus supplement and indenture.