Item 1.01. Entry into a Material Definitive Agreement.
On August 27, 2021, Parker-Hannifin Corporation (the “Company”) entered into a Credit Agreement (the “Credit Agreement”) among the Company, the lenders party thereto and KeyBank National Association, as administrative agent. The Credit Agreement provides for a senior unsecured delayed-draw term loan facility in an aggregate principal amount of $2.0 billion (the “Term Loan Facility”). The proceeds of the Term Loan Facility, if drawn, will be used solely by the Company to finance a portion of the consideration in its proposed acquisition of all outstanding capital stock of Meggitt plc (the “Acquisition”), as described in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 3, 2021 (the “Meggitt Current Report”). The Term Loan facility will reduce the commitments made by lenders under the Bridge Credit Facility, as defined and described in the Meggitt Current Report.
Commitments under the Term Loan Facility (“Commitments”) will terminate on the first to occur of (i) the date on which the Acquisition is consummated, (ii) the valid termination of the Company’s or any of its subsidiaries’ obligations to consummate the Acquisition and (iii) February 2, 2023 (as such date may be extended in certain circumstances). The Term Loan Facility is unsecured and is not guaranteed by any subsidiary of the Company.
Borrowings under the Term Loan Facility will mature on the three-year anniversary of the funding of such Term Loan Facility, and will bear interest, at the option of the Company, at either the Base Rate (determined in accordance with the Credit Agreement) or the LIBOR Fixed Rate (determined in accordance with the Credit Agreement), in each case plus a per annum applicable rate that fluctuates between 0.0 basis points and 62.5 basis points, in the case of borrowings priced at the Base Rate, and between 100.0 basis points and 162.5 basis points, in the case of borrowings priced at the LIBOR Fixed Rate, based upon the long-term unsecured senior, non-credit enhanced debt ratings of the Company by Moody’s Investors Service, Inc., S&P Global Ratings and Fitch Ratings, subject to certain provisions taking into account potential differences in ratings issued by the relevant ratings agencies or a lack of ratings issued by such ratings agencies (the “Ratings”). The Company will be required to pay a ticking fee, which will accrue at a per annum rate that fluctuates between 9.0 basis points and 20.0 basis points based on the Ratings, on the actual daily amount of the undrawn aggregate Commitments, accruing during the period commencing October 26, 2021, and ending upon termination or expiration of the Commitments.
The Credit Agreement contains certain customary representations and warranties, affirmative and negative covenants, and events of default. Negative covenants include, among others, limitations on the incurrence of liens by the Company and its subsidiaries. In addition, commencing on the last day of the second full fiscal quarter occurring after the funding of the Term Loan Facility, at any time that the Company is not able to maintain certain specified Ratings, the Company may not permit its Debt to Capitalization Ratio (as defined in the Credit Agreement) to exceed 0.65 to 1.00 (as of the last day of any fiscal quarter). If any of the events of default occur and are not cured within applicable grace periods or waived, any unpaid amounts under the Credit Agreement may be declared immediately due and payable.
