ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On November 9, 2021, Oncor Electric Delivery Company LLC, a Delaware limited liability company (“Oncor”), entered into a sustainability-linked Revolving Credit Agreement (the “New Credit Agreement”) among Oncor, as borrower, the lenders from time to time party thereto (the “Lenders”), JPMorgan Chase Bank, N.A. (“JPMorgan”), as administrative agent for the Lenders and as swingline lender, the fronting banks from time to time parties thereto for letters of credit issued thereunder and the other financial institutions party thereto, including Citibank N.A. and Wells Fargo Securities, LLC, as co-sustainability structuring agents. Oncor intends to use the borrowings under the New Credit Agreement for working capital and other general corporate purposes.
The New Credit Agreement provides for an unsecured revolving credit facility in an aggregate principal amount of up to $2.0 billion. The New Credit Agreement also contains a customary accordion feature allowing Oncor to request an increase of up to $400 million, in $100 million increments, provided certain conditions set forth in the New Credit Agreement are met. The New Credit Agreement has a five-year term expiring on November 9, 2026 and gives Oncor the option of extending the term for up to two additional one-year periods.
Loans under the New Credit Agreement bear interest at per annum rates equal to, at Oncor’s option, (i) adjusted LIBOR plus an applicable margin of between 0.875% and 1.500%, depending on certain credit ratings assigned to Oncor’s debt (the “Applicable Debt Ratings”), or (ii) an alternate base rate (equal to the higher of (1) the prime rate of JPMorgan, (2) the greater of the federal funds effective rate or the overnight bank funding rate, plus 0.50%, and (3) adjusted LIBOR plus 1.0%) plus an applicable margin of between 0.000% and 0.500%, depending on the Applicable Debt Ratings. Based on Oncor’s current debt ratings, its LIBOR-based borrowings will bear interest at LIBOR plus 1.000% and its alternate base rate borrowings will bear interest at the alternate base rate plus 0.000%. The New Credit Agreement provides for an alternative rate of interest upon the occurrence of certain events related to the phase out of LIBOR.
A commitment fee is payable quarterly in arrears and upon termination or commitment reduction at a rate per annum equal to between 0.075% and 0.225% (such spread shall depend on the Applicable Debt Ratings) of the commitments under the New Credit Agreement. Based on Oncor’s current Applicable Debt Ratings, its commitment fee will be 0.100%. Letter of credit fees under the New Credit Agreement are payable quarterly in arrears and upon termination at a rate per annum equal to the spread over adjusted LIBOR under the New Credit Agreement. Fronting fees in an amount as separately agreed by Oncor and any fronting bank that issues a letter of credit are also payable quarterly in arrears and upon termination to each such fronting bank.
The New Credit Agreement includes sustainability-linked pricing metrics related to specific environmental and employee health and safety sustainability objectives. The New Credit Agreement provides that the applicable margin and commitment fee may be increased, decreased or have no change depending on Oncor’s annual performance on the two sustainability-linked pricing metrics set forth in the New Credit Agreement. The maximum pricing adjustment in any given year is +/- 0.01% on the commitment fee and +/- 0.05% on the applicable margin.
The New Credit Agreement contains customary covenants for facilities of this type, restricting, subject to certain exceptions, Oncor and its subsidiaries from, among other things:
| | • | | incurring additional liens; |
| | • | | entering into mergers and consolidations; |
| | • | | sales of substantial assets; and |
| | • | | acquisitions and investments in subsidiaries. |
In addition, the New Credit Agreement requires that Oncor maintain a maximum consolidated senior debt to capitalization ratio of 0.65 to 1.00 and observe certain customary reporting requirements and other affirmative covenants.
The New Credit Agreement also contains customary events of default for facilities of this type, the occurrence of which would allow the Lenders to accelerate all outstanding loans and terminate their commitments, including certain changes in control of Oncor that are not permitted transactions under the New Credit Agreement and cross-default provisions in the event Oncor or any of its subsidiaries defaults on indebtedness in a principal amount in excess of $100 million or receives judgments for the payment of money in excess of $100 million that are not discharged or stayed within 60 days.
