Going by Bloomberg, the leading global snack food and beverages company, PepsiCo Inc. (PEP), has entered into a new four-year unsecured revolving credit agreement with a consortium of world’s leading investment bankers for optimizing its capital structure.
Citicorp (C), JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC) offering a sum of $325.0 million each emerged as the major contributor to the new $2.88 billion revolving credit line facility. However, PepsiCo may increase the size of the new credit facility by up to $3.5 billion based on its agreement with the lending institutions.
The new credit facility will replace the company’s prior 364-days unsecured revolving credit facility of $2,575.0 million, entered on June 16, 2010. Under the agreement, the company was also permitted to request for the renewal of this facility for another 364 days or convert any amount outstanding into a term loan for a period of up to one year.
Under a revolving credit facility, a company can borrow again once it repays all dues under the old credit facility. The company may utilize this fund for general corporate purposes, which includes repayment of outstanding commercial papers, working capital and capital investment or acquisitions.
PepsiCo has also notified that it has terminated the $2.0 billion five-year credit facility entered on May 22, 2006 and $2,575.0 million 364-days unsecured revolving credit facility entered on June 16, 2010, effective from June 14, 2011 as there were no outstanding borrowings under both credit facilities.
Moreover, the company has also terminated the $1.080 billion First Amended Restated Credit Agreement entered on October 19, 2001 borrowed by Pepsi-Cola Metropolitan Bottling Group Inc., a wholly owned subsidiary of PepsiCo.
PepsiCo, which competes with The Coca-Cola Company (KO) and Dr Pepper Snapple Group Inc. (DPS), currently holds a Zacks #3 Rank, implying a short-term Hold rating on the stock. This corresponds with our long-term Neutral recommendation on the stock.
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