Item 1.01 Entry into a Material Definitive Agreement
On April 21, 2020 Caterpillar Inc. (“Caterpillar”) entered into a Credit Agreement (the “Short Term Facility”) among Caterpillar and Caterpillar Financial Services Corporation (“Cat Financial”), (collectively, the “Borrowers”), certain financial institutions named therein, Citibank, N.A., as the agent, Citibank, N.A., BofA Securities, Inc., JPMorgan Chase Bank, N.A., and Société Générale, as joint lead arrangers and joint bookrunners, which provides an unsecured revolving credit facility to the Borrowers in an aggregate amount of up to $3.875 billion that expires on December 31, 2020.
The Short Term Facility is available for general corporate purposes. As of the date hereof, the Borrowers have not drawn on the Short Term Facility.
The Short Term Facility contains certain representations and warranties, covenants and events of default, including financial covenants. Under the Short Term Facility, Caterpillar is required to maintain consolidated net worth not less than $9 billion at all times. Caterpillar’s consolidated net worth is defined as the consolidated stockholder’s equity including preferred stock but excluding the pension and other post-retirement benefits balance within Accumulated other comprehensive income (loss). Cat Financial is required to maintain an interest coverage ratio above 1.15 to 1, where the interest coverage ratio is defined as the ratio of (1) profit excluding income taxes, interest expense and net gain/(loss) from interest rate derivatives to (2) interest expense, calculated at the end of each calendar quarter for the rolling four quarter period then most recently ended. Cat Financial is also required to maintain a leverage ratio (consolidated debt to consolidated net worth) not greater than 10.0 to 1, calculated (1) on a monthly basis as the average of the leverage ratios determined on the last day of each of the six preceding calendar months and (2) on each December 31. Drawings under the Short Term Facility are also subject to conditions precedent and the payment of certain facility fees.
Certain of the lenders and agents party to the Short Term Facility, as well as certain of their respective affiliates, have performed, and may in the future perform, for Caterpillar and its subsidiaries, various commercial banking, investment banking, underwriting and other financial advisory services, for which they have received and may in the future receive customary fees and expenses.
The foregoing description is qualified in its entirety by the terms and provisions of the Short Term Facility which is filed as an exhibits to this report and incorporated herein by reference.