Meritor Acquisition and 2022 Financial Results
Table of Contents
On July 13, 2022, we entered into a loan agreement under which we may obtain delayed-draw loans in an amount up to $.0 billion in the aggregate prior to October 13, 2022.
We drew down the entire $2.0 billion balance on August 2, 2022, to help fund the acquisition of Meritor. During the fourth quarter of 2022, we paid down $450 million of the
term loan. The interest rate is based on SOFR for the one-month interest period plus the relevant spread. The loan will mature on August 1, 2025. The agreement contains
customary events of default and financial and other covenants, including maintaining a net debt to capital ratio of no more than 0.65 to 1.0.
The $250 million 7.125 percent debentures and $165 million 5.65 percent debentures are unsecured and are not subject to any sinking fund requirements. We can redeem these
debentures at any time prior to maturity at the greater of par plus accrued interest or an amount designed to ensure that the debenture holders are not penalized by the early
redemption.
Our debt agreements contain several restrictive covenants. The most restrictive of these covenants applies to our revolving credit facility which will upon default, among other
things, limit our ability to incur additional debt or issue preferred stock, enter into sale-leaseback transactions, sell or create liens on our assets, make investments and merge or
consolidate with any other entity. At December 31, 2022, we were in compliance with all of the financial debt covenants under our borrowing agreements.
Shelf Registration
As a well-known seasoned issuer, we filed an automatic shelf registration for an undetermined amount of debt and equity securities with the Securities and Exchange
Commission (SEC) on February 8, 2022. Under this shelf registration we may offer, from time to time, debt securities, common stock, preferred and preference stock,
depositary shares, warrants, stock purchase contracts and stock purchase units. Our current shelf is scheduled to expire in February 2025.
Interest Expense
For the years ended December 31, 2022, 2021 and 2020, total interest incurred was $204 million, $113 million and $102 million, respectively, and interest capitalized was $5
million, $2 million and $2 million, respectively.
Fair Value of Debt
Based on borrowing rates currently available to us for bank loans with similar terms and average maturities, considering our risk premium, the fair values and carrying values of
total debt, including current maturities, were as follows:
In millions
Fair values of total debt (1)
Carrying value of total debt
(1) The fair value of debt is derived from Level 2 input measures.
Filtration Contingent Debt Agreement
December 31,
2022
2021
$
7,400 $
7,855
4,461
4,159
On September 30, 2022, certain of our subsidiaries entered into a $1.0 billion credit agreement (Credit Agreement), consisting of a $400 million revolving credit facility and a
$600 million term loan facility (Facilities), in anticipation of the separation of our filtration business. Borrowings under the Credit Agreement will not become available under
the Credit Agreement unless and until, among other things, there is a sale to the public of shares in our subsidiary that holds the filtration business (Parent Borrower). The
Credit Agreement will automatically terminate if no such public sale of shares of Parent Borrower occurs on or prior to March 30, 2023. Borrowings under the Credit
Agreement would be available to Parent Borrower and one or more of its subsidiaries (Borrower). If borrowings become available under the Credit Agreement, the Facilities
would mature on September 30, 2027.
Borrowings under the Credit Agreement would bear interest at varying rates, depending on the type of loan and, in some cases, the rates of designated benchmarks and the
applicable Borrower's election. Generally, U.S. dollar-denominated loans would bear interest at adjusted term SOFR (which includes a 0.10 percent credit spread adjustment to
term SOFR) for the applicable interest period plus a rate ranging from 1.125 percent to 1.75 percent depending on Parent Borrower's net leverage ratio.
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