The updated credit agreement provides for up to $6.5 billion in loans, and interest is payable at a rate of LIBOR plus 1% plus an annual commitment fee of 0.1% of the daily undrawn balance. The loans have a 5 year maturity.
The amendment replaces Facebook’s existing credit facilities.
The use of proceeds is working capital and which includes data center development, acquisitions and repurchases of Facebook’s securities. Expect some build out of Facebook’s facilities as the agreement hits this issue directly even as the capital lease obligation covenant remains unchanged. However, with a $3 billion trigger, the covenant had plenty of flexibility built in already.
This is a change from the previous facilities that were limited to:
- $5 billion of general corporate purposes; and
- $1.5 billion for tax payments due to RSU settlements in connection with Facebook’s IPO.
The covenants have not changed significantly and continue to limit Facebook’s ability to:
- incur debt;
- create liens;
- merge or sell all of its assets;
- enter into hedging arrangements for speculation or trading;
- pay dividends; and
- affiliate transactions.
For those who enjoy the politics of it, JP Morgan still appears to be Facebook’s main banker and is the administrative agent. Bank of America and Morgan Stanley are still involved, and BOA’s Merrill Lynch unit is a new addition as is Barclays. Citibank, Credit Suisse, RBC, Wells Fargo and Goldman Sachs are out. They may still be in the syndicate for all we know, but they are off the cover page.