|IHS MARKIT LTD. filed this Form 10-Q on 06/26/2018|
The carrying value of our variable rate debt instruments approximate their fair value because of the variable interest rates associated with those instruments. The fair values of the 5% Notes, the 4.75% Notes, and the 4% Notes were measured using observable inputs in markets that are not active; consequently, we have classified those notes within Level 2 of the fair value hierarchy.
On June 25, 2018, we terminated the 2016 revolving facility and entered into a new $2.0 billion senior unsecured revolving credit agreement (“2018 revolving facility”). Borrowings under the 2018 revolving facility mature in June 2023. The interest rates for borrowings under the 2018 revolving facility are the applicable LIBOR plus a spread of 1.00 percent to 1.75 percent, depending upon our credit rating. A commitment fee on any unused balance is payable periodically and ranges from 0.125 percent to 0.30 percent based upon our credit rating. As a result of the termination of the 2016 revolving facility, the outstanding letters of credit under that facility were transferred to the 2018 revolving facility.
Coincident with the termination of the 2016 revolving facility, we terminated the 2016 term loan and entered into a new senior unsecured amortizing term loan agreement (“2018 term loan”). The 2018 term loan has a final maturity date of July 2021. The interest rates for borrowings under the 2018 term loan are the same as those under the 2018 revolving facility.
Subject to certain conditions, the 2018 revolving facility may be expanded by up to an aggregate of $1.0 billion in additional commitments. The 2018 revolving facility and the 2018 term loan have certain financial and other covenants, including a maximum Leverage Ratio and a minimum Interest Coverage Ratio, which is defined as the ratio of Consolidated EBITDA to Consolidated Interest Expense, as such terms are defined in the agreements.
On June 25, 2018, we also entered into a new 364-day Credit Agreement (the “364-Day Credit Agreement”) for a term loan credit facility in an aggregate principal amount of $1.855 billion, which will be available to be borrowed on the closing date of the 364-Day Credit Agreement, which will occur substantially concurrently with the consummation of our previously announced acquisition of Ipreo. The proceeds of this term loan will be used to finance the acquisition of Ipreo, repay amounts outstanding under Ipreo’s existing credit agreement and senior notes indenture, and pay related fees and expenses. The commitments in respect of the 364-Day Credit Agreement and the extension of credit thereunder are conditioned upon satisfaction (or waiver) of certain conditions precedent, including, among other things, the substantially concurrent consummation of the acquisition of Ipreo in accordance with the terms of the acquisition agreement.
The interest rate for borrowings under the 364-day Credit Agreement is based on an alternate base rate (equal to the highest of (a) the federal funds rate plus 0.50%, (b) HSBC Bank USA, National Association’s “prime rate,” and (c) LIBOR plus 1.00%, plus spread ranging from 0.00% to 0.75% for alternate base rate loans and ranging from 1.00% to 1.75% for LIBOR loans, with such applicable spread dependent upon our credit rating, and each such applicable spread being subject to a 0.25% step-up on the 180th day following the closing date of the agreement and a 0.50% step-up on the 270th day following the closing date. The 364-Day Credit Agreement also contains a fee in respect of the average daily unused commitments payable from August 3, 2018 until the date on which all commitments are terminated (including by way of funding the term loan on the closing date of the agreement), based on a commitment fee rate ranging from 0.125% to 0.30%, dependent upon our credit rating.
The 364-Day Credit Agreement has certain financial and other covenants that are consistent with the covenants contained in the 2018 revolving facility and the 2018 term loan, including a maximum Leverage Ratio and a minimum Interest Coverage Ratio, which is defined as the ratio of Consolidated EBITDA to Consolidated Interest Expense, as such terms are defined in the 364-Day Credit Agreement.
Our business is exposed to various market risks, including interest rate and foreign currency risks. We utilize derivative instruments to help us manage these risks. We do not hold or issue derivatives for speculative purposes.
Interest Rate Swaps
To mitigate interest rate exposure on our outstanding revolving facility debt, we utilize interest rate derivative contracts that effectively swap $400 million of floating rate debt at a 2.86 percent weighted-average fixed interest rate, plus the applicable spread on our floating rate debt. We entered into these swap contracts in November 2013 and January 2014, and the contracts expire between May and November 2020.