Nike Inc. (NYSE: NYSE:NKE) has established a $1 billion unsecured revolving credit facility with Bank of America and other lenders, according to a recent 8K filing with the Securities and Exchange Commission. This new credit line, which will be available for general corporate purposes and working capital, including the support of commercial paper issuance, was formalized on Thursday.
The facility, with a 364-day term, is set to mature on March 7, 2025, but it offers flexibility for Nike. The sportswear giant has the option to increase the borrowing limit to $1.5 billion, renew the facility for an additional 364 days, or convert outstanding amounts into a term loan for up to a year after the termination date.
At present, Nike is the sole borrower under this credit agreement, but it allows the designation of subsidiary borrowers in the future. Should a subsidiary be designated, Nike has agreed to guarantee the subsidiary's obligations.
Interest rates for borrowings can be chosen by Nike and will be either Term SOFR plus a margin ranging from 0.3575% to 0.690% or a base rate determined by the highest of Bank of America's prime rate, the federal funds effective rate plus 0.50%, or one month Term SOFR plus 1.00%.
These rates will be adjusted based on Nike's public ratings of its long-term debt. Interest on the loans can be paid over one, three, or six months, subject to availability, and must be settled at least quarterly.
The agreement includes covenants that limit Nike and its subsidiaries' ability to incur additional liens, engage in certain mergers, acquisitions, disposals, and restrict the use of loan proceeds. Notably, the credit agreement does not contain any financial covenants.
This strategic financial maneuver provides Nike with additional liquidity and financial flexibility as it navigates its business operations and growth initiatives. The information for this article is based on a press release statement.
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