Caterpillar Seeks $3 Billion Loan From Banks to Boost Liquidity

(Bloomberg) -- Caterpillar Inc. is in discussions with banks to raise a new $3 billion 9-month revolving credit facility, according to people familiar with the matter.

The deal could be increased to about $5 billion in total and will help boost the construction equipment company’s liquidity, the people said, asking not to be named discussing a private transaction.

Representatives for Citibank, which is leading the deal, and Caterpillar declined to comment. Other banks on the deal include Bank of America Corp., JPMorgan Chase & Co. and Societe Generale SA.

The new loan follows a $2 billion deal in the bond market on Monday. The company currently has about $10.5 billion in revolving credit facilities.

Like many companies, Caterpillar is bracing for the impact of the coronavirus on its revenues. Chief Executive Officer Jim Umpleby last week sent a letter to employees telling them that senior executives, management and other salaried workers would have their base-pay frozen in 2020.

Umpleby also said senior executives wouldn’t receive annual incentive payouts. The decision, which came days after the company pulled its 2020 outlook, represents the company’s efforts to cut costs during the pandemic.

Caterpillar’s stock fell 1.86% on Thursday to close at $125.03, the third-worst performer in the Dow Jones Industrial Average.

In the Americas, companies have raised $50 billion of new loans and tapped $212 billion on existing revolving credit facilities since March 9, according to data compiled by Bloomberg.

Read more: Companies are borrowing at slowest pace since the crisis began

Opening pricing on the drawn fees for the new loan are 125 basis points over the London interbank offered rate, the people said. The undrawn fees are 30 basis points and the upfront fees are 20 basis points, the people added. The deal also includes a 75 basis point Libor floor.

Commitments are due on April 13 and the loan closes on April 16, the people said.

Caterpillar is rated A3 by Moody’s Investors Service, and A by both S&P Global Ratings and Fitch Ratings, placing it comfortably in investment grade.

Caterpillar has an existing $3.15 billion revolving credit facility maturing in September, a $2.73 billion revolver maturing in 2022, and a $4.62 billion revolver maturing in 2024, according to data compiled by Bloomberg.

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