Item 1.01. Entry into a Material Definitive Agreement
Revolving Credit Agreement
On October 18, 2022 (the “Closing Date”), Fortive Corporation, a Delaware corporation (the “Company”), entered into a second amended and restated credit agreement with Bank of America, N.A. (“Bank of America”), as administrative agent and a swing line lender, and a syndicate of lenders from time to time party thereto, that provides for a 5-year revolving credit facility in an aggregate principal amount not to exceed $2.0 billion, which includes a multicurrency borrowing feature (the “Revolving Credit Agreement”). On the Closing Date, the Company did not borrow any funds under the Revolving Credit Agreement.
The Revolving Credit Agreement amends and restates the Company’s existing amended and restated credit agreement, dated November 30, 2018 (as amended prior the Closing Date), with Bank of America, as administrative agent and swing line lender, and the lenders referred to therein. The Revolving Credit Agreement extends the availability period of the revolving credit facility from November 30, 2023 to October 18, 2027 (the “Maturity Date”); provided that the Revolving Credit Agreement is subject to up to two one-year extension options at the request of the Company and with the consent of the lenders. The Revolving Credit Agreement also contains an increase option permitting the Company to request up to an aggregate additional $1.0 billion principal amount, as a revolving credit facility (or increase thereof), term loan facility or combination thereof, from lenders that elect to make such increase available, upon the satisfaction of certain conditions.
Borrowings under the Revolving Credit Agreement bear interest at the Company’s option as follows: (i) in the case of borrowings denominated in U.S. Dollars, (1) Term SOFR Loans (as defined in the Revolving Credit Agreement) bear interest at a variable rate equal to the Term SOFR (as defined in the Revolving Credit Agreement) plus a margin of between 68.5 and 110 basis points (depending on the Company’s long-term debt credit rating); and (2) Base Rate Committed Loans and USD Swing Line Loans (each as defined in the Revolving Credit Agreement) bear interest at a variable rate equal to the highest of (a) the Federal funds rate (as published by the Federal Reserve Bank of New York from time to time) plus 1/2 of 1.0%, (b) Bank of America’s prime rate as publicly announced from time to time, (c) Term SOFR (based on one-month interest period) plus 1.0% and (d) 1.0%, plus, in each case, a margin of between 0 to 10 basis points (depending on the Company’s long-term debt credit rating); and (ii) in the case of borrowings denominated in an Alternative Currency (as defined in the Revolving Credit Agreement), Alternative Currency Loans and Alternative Currency Swing Line Loans (each as defined in the Revolving Credit Agreement) bear interest at the applicable variable benchmark rate, plus, in each case, a margin of between 68.5 and 110 basis points (depending on the Company’s long-term debt credit rating). In no event will Term SOFR Loans, Base Rate Committed Loans, Alternative Currency Loans, USD Swing Line Loans or Alternative Currency Swing Line Loans bear interest at a rate lower than 0.0%. In addition, the Company is required to pay a per annum facility fee of between 6.5 and 15 basis points (depending on the Company’s long-term debt credit rating) based on the aggregate revolving credit commitments under the Revolving Credit Agreement, regardless of usage.
Additionally, the Company will receive an interest rate adjustment of up to 0.04% and a facility fee adjustment of up to 0.01%, in each case, under the Revolving Credit Agreement based on its fiscal year sustainability-linked performance with respect to the reduction of the Company’s total carbon emissions (measured in metric tons CO2e), as compared to the established baseline for each fiscal year ending on and after December 31, 2023.
Borrowings under the Revolving Credit Agreement are prepayable at the Company’s option in whole or in part without premium or penalty. Amounts borrowed under the Revolving Credit Agreement may be repaid and reborrowed from time to time prior to the Maturity Date.
The Revolving Credit Agreement requires the Company to maintain a Consolidated Net Leverage Ratio (as defined in the Revolving Credit Agreement) of 3.50 to 1.00 or less; provided that the maximum Consolidated Net Leverage Ratio will be increased to 4.00 to 1.00 for the four consecutive full fiscal quarters immediately following the consummation of any acquisition by the Company or any subsidiary of the Company in which the purchase price exceeds $250 million. The Consolidated Net Leverage Ratio will be tested beginning with the fiscal quarter ending December 31, 2022.
The Company’s obligations under the Revolving Credit Agreement are unsecured. The Company has unconditionally and irrevocably guaranteed the obligations of each of its subsidiaries in the event a subsidiary is named a co-borrower under the Revolving Credit Agreement. The Revolving Credit Agreement contains customary representations, warranties, conditions precedent, events of default, indemnities and affirmative and negative covenants, including covenants that, among other things, restrict the ability of the Company
