Business Context and Reporting Period
Company: The Clorox Company
Filing Type: Form 8-K (Current Report)
Date of Report: February 8, 2017
Event: Entry into a new material definitive credit agreement and termination of a prior agreement.
Key Financial Metrics and Liquidity
- New Credit Facility: $1,100,000,000 five-year unsecured revolving credit agreement.
- Purpose: General corporate purposes.
- Administrative Agents: JPMorgan Chase Bank, N.A., Citibank, N.A., and Wells Fargo Bank, National Association.
- Financial Covenants: The agreement contains only one financial covenant: a consolidated interest coverage ratio.
- Other Covenants: Includes customary restrictions on liens, consolidations, mergers, and asset sales.
- Termination Costs: No material termination fees or penalties were incurred for ending the previous agreement.
Material Changes Versus Prior Period
The Company terminated its existing $1,100,000,000 credit agreement dated October 1, 2014, which was scheduled to mature on October 1, 2019. This facility was replaced concurrently with the new five-year agreement. The filing text does not provide specific revenue, profit, or cash flow figures for the period, as this report focuses solely on the financing arrangement.
Outlook, Risks, and Unusual Items
- Interest Rate Structure: Borrowings may be based on a Base Rate (highest of Citibank base rate, Federal Funds rate + 0.5%, or One Month LIBOR + 1%) or LIBOR, plus an applicable margin tied to the Company's Credit Rating.
- Fees: The Company is required to pay a quarterly facility fee and letter of credit fees, both of which vary based on the Credit Rating.
- Events of Default: Includes nonpayment, covenant defaults, bankruptcy, insolvency, cross defaults, and change of control.
- Lender Relationships: Certain lenders have pre-existing relationships with the Company involving prior credit facilities, share repurchases, bond offerings, and investment banking services.
Investor Verification Checklist
- Verify the specific terms of the consolidated interest coverage ratio covenant in the attached Credit Agreement (Exhibit 10.1).
- Confirm the current Credit Rating assigned to the Company to determine applicable interest rate margins and facility fees.
- Review the full text of Exhibit 10.1 for detailed definitions of "Base Rate" and specific negative covenants regarding asset sales and mergers.
- Assess the impact of the new facility on the Company's overall liquidity position compared to the terminated 2014 agreement.