Watsco secures new $750 million credit facility, terminates prior agreement

Watsco, Inc. (NYSE:WSO) entered into a new unsecured, five-year $750 million syndicated multicurrency credit agreement with a syndicate of lenders and Bank of America, N.A. as Administrative Agent, the company stated in a press release filed with the SEC. The agreement was executed Wednesday of last week and replaces Watsco’s previous $600 million revolving credit facility, which was terminated on the same day.

According to the filing, Watsco borrowed $69.7 million under the new credit facility to repay outstanding amounts under the prior agreement. The new facility matures on October 21, 2031.

The new credit facility includes a $125 million swing line loan sublimit, a $10 million letter of credit sublimit, and a $150 million borrowing sublimit for multicurrency loans in Euros, Pounds Sterling, and Canadian Dollars. Watsco may elect to reduce borrowing capacity by $100 million, $200 million, or $300 million during the seasonal period from September 1 to March 1 each year.

The agreement also allows for up to $375 million of incremental revolving increases or term loans, with a limit of six requests. Borrowings under the facility accrue interest at rates based on Term SOFR or Daily Simple SOFR plus a spread ranging from 100 to 137.5 basis points, depending on the company’s debt-to-EBITDA ratio. For U.S. dollar-denominated loans, rates may also be based on the Federal Funds Rate, the prime rate, or one-month Term SOFR, plus a spread from 0 to 50 basis points. The company pays a variable commitment fee on the unused portion of the commitment, ranging from 10 to 17.5 basis points.

Watsco’s obligations under the new facility are guaranteed by substantially all of its wholly owned subsidiaries. The facility includes customary covenants related to leverage and interest coverage ratios, as well as standard events of default and remedies.

No penalties were incurred in connection with the termination of the prior credit facility. The information in this article is based on a press release statement from Watsco’s SEC filing.