Cisco Systems, Inc. (NASDAQ:CSCO) entered into a 364-day credit agreement with certain lenders including Bank of America, according to an 8-K filed March 30.
Under the agreement, the networking giant will receive a $2 billion in unsecured revolving credit facility.
The termination date of the facility is March 29, 2018, according to the filing.
Cisco said in the filing that it intends to use the money for working capital and general corporate purposes.
The interest rate applicable to outstanding balances under the credit agreement will be based on either:
(i) The higher of the rates on overnight Federal Funds transactions with members of the Federal Reserve System plus 0.50%; Bank of America’s “prime rate” as announced from time to time or; the London Interbank Offered Rate (LIBOR) for an interest period of one month plus 1.00%.
(ii) LIBOR plus a margin that is based on Cisco’s senior debt credit ratings as published by S&P Global Rating and Moody’s Investors Service.
Cisco Systems, Inc. (NASDAQ:CSCO) will pay an annual commitment fee during the term of the credit agreement which may vary depending on the company’s credit ratings.
The credit agreement contains customary representations and warranties as well as customary affirmative and negative covenants.
Negative covenants include, among others, limitations on incurrence of liens and secured indebtedness, and limitations on incurrence of any indebtedness by Cisco’s subsidiaries. In addition, the credit agreement requires that Cisco maintains a ratio of consolidated EBITDA to consolidated interest expense of not less than 3.00 to 1.00.
Also, the credit agreement contains customary events of default. Upon the occurrence and during the continuance of an event of default, the lenders may declare the outstanding loans and all other obligations under the credit agreement immediately due and payable, according to the filing.
Merrill Lynch, Pierce, Fenner & Smith, Deutsche Bank Securities, Citigroup Global Markets, JPMorgan Chase Bank, and Wells Fargo Securities are acting as joint lead arrangers and joint book runners for the facility.
Meanwhile, shares of Cisco Systems, Inc. (NASDAQ:CSCO) closed up 0.18% on Friday. The stock is up 11.85% year-to-date.