Stanley Black & Decker, Inc. (NYSE:SWK), the Connecticut-based tools and storage company, has announced the entry into new credit agreements totaling $3.5 billion, as disclosed in a recent SEC filing. The agreements include a 364-Day Credit Agreement and an Amended and Restated Five Year Credit Agreement, both dated June 28, 2024.
The 364-Day Credit Agreement, facilitated by Citibank, N.A. and other major banks, provides Stanley Black & Decker with a $1.25 billion revolving credit facility. The agreement allows the company and its subsidiaries, designated as borrowers, to draw funds in U.S. Dollars or Euros. The interest rates for this facility are based on the Base Rate, EURIBO Rate, or Term SOFR, plus an applicable margin. The company must repay all advances by June 27, 2025, or convert them into a term loan to be repaid within a year.
The Five Year Credit Agreement, also managed by Citibank, N.A. along with other banks, amends a previous agreement from 2021. It provides a $2.25 billion revolving credit facility with an additional sub-limit for swing line advances up to the Euro equivalent of $800 million. Borrowings can be made in U.S. Dollars, Euros, or Pounds Sterling, with interest rates based on the Base Rate, Term SOFR, EURIBO Rate, or SONIA. The company has the option to extend the repayment deadline annually from the initial termination date of June 28, 2029.
Both agreements require Stanley Black & Decker to maintain an interest coverage ratio of at least 3.50 to 1.00, with specified conditions allowing for lower ratios during certain periods up to the second fiscal quarter of 2025. The proceeds from these credit facilities are earmarked for general corporate purposes, and none were drawn at the time of closing.
Concurrently, the company terminated a previous 364-Day Credit Agreement dated September 6, 2023. This move aligns with the company's financial strategy and provides flexibility for its operational needs.
In other recent news, Stanley Black & Decker has been the subject of significant developments. Barclays downgraded the company's stock from Overweight to Equalweight, citing potential hindrances to revenue growth through 2025 due to inventory reduction needs and a subdued consumer spending environment. The firm also predicts increased operational expenses for Stanley Black & Decker as it strives to regain market share.
On the earnings front, Stanley Black & Decker reported a stable performance in the first quarter of 2024, despite a slight decrease of 1% in organic revenues. The company is on track with its global cost reduction program, targeting $1.5 billion in savings by the end of 2024, and anticipates a total company adjusted EBITDA margin of around 10% for the year. Stanley Black & Decker is also planning to reduce inventory by $400 million to $500 million in 2024.
These recent developments reflect Stanley Black & Decker's strategic efforts to navigate through current economic headwinds. The company continues to invest in growth opportunities, particularly within the DEWALT and outdoor product lines, and remains committed to enhancing profitability.
InvestingPro Insights
As Stanley Black & Decker (NYSE:SWK) secures its financial position with new credit agreements, insights from InvestingPro help to paint a broader picture of the company's performance and potential. Currently, the company holds a market capitalization of $11.98 billion. Despite a challenging revenue growth rate of -4.34% over the last twelve months as of Q1 2024, analysts are optimistic about the company's prospects, expecting net income to grow this year. This expectation is underscored by the company's significant role as a player in the Machinery industry.
Notably, Stanley Black & Decker has a long-standing history of rewarding shareholders, having raised its dividend for 53 consecutive years, with a current dividend yield of 4.06%. This is particularly relevant for investors seeking stable income streams. Additionally, the company's shares are trading near their 52-week low, presenting a potential opportunity for value investors.
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