Oracle Credit Agreement: What You Need to Know
Oracle Corporation is a multinational computer technology corporation that offers software, hardware, and cloud services. Over the years, the company has grown to become one of the largest technology companies in the world. As a result, Oracle has entered into various agreements to fund its operations, one of which is the Oracle Credit Agreement.
The Oracle Credit Agreement is a loan agreement between Oracle Corporation and a group of lenders that provides Oracle with the necessary funds to operate its business. The agreement outlines the terms and conditions of the loan, including the amount of the loan, the interest rate, the repayment schedule, and any other fees associated with the loan.
One of the primary reasons why Oracle entered into the credit agreement is to finance its acquisition of NetSuite Inc. According to the agreement filed with the U.S. Securities and Exchange Commission (SEC), the loan provided Oracle with $3 billion in credit facilities. The loan is split into two tranches – Tranche A and Tranche B – with each having its own terms and conditions.
Tranche A provides Oracle with $2 billion in credit facilities and has a maturity date of August 31, 2021. Tranche B provides Oracle with $1 billion in credit facilities and has a maturity date of August 31, 2022. The interest rate for both tranches is determined using a floating rate based on the London Interbank Offered Rate (LIBOR), plus an applicable margin.
The loan agreement also includes various financial covenants that Oracle must adhere to, including maintaining certain ratios related to its leverage and interest coverage. Failure to comply with these covenants could result in an event of default, which would require Oracle to repay the loan immediately.
As with any credit agreement, there are risks involved. If Oracle is unable to repay the loan as scheduled, it could lead to a downgrade in its credit rating, which could result in higher borrowing costs and negatively impact the company`s financial position. Moreover, any adverse developments in the tech industry could make it challenging for Oracle to meet its financial obligations.
In summary, the Oracle Credit Agreement is essential for the company to finance its operations, and it is crucial for Oracle to comply with the terms and conditions of the loan. As one of the largest technology companies in the world, Oracle`s performance is closely monitored by investors, and any negative developments could have significant consequences for the company.