Allison Transmission Announces Closing of Amend and Extend of its Revolving Credit Facility and Term Loan Debt

Rhea-AI Summary

Allison Transmission Holdings Inc. (ALSN) announced that its subsidiary entered into a credit agreement amendment, increasing commitments to $750 million, extending maturity dates, refinancing term loan debt, and reducing effective interest rates. The company aims to manage its balance sheet prudently and enhance capital market opportunities.

Financial Analyst

The amendment of Allison Transmission Holdings Inc.'s credit agreement is a strategic financial maneuver that warrants attention from the perspective of a Financial Analyst. By upsizing the revolving credit facility and refinancing term loan debt, Allison has demonstrated a proactive approach in capital management. The increase in the revolving credit facility from $650 million to $750 million enhances the company's liquidity, providing it with more financial flexibility to address operational needs or growth opportunities. The extension of the maturity dates for both the revolving credit facility and term loan debt to 2029 and 2031, respectively, is a prudent move. It reduces the short-term liquidity risk and reflects a strategic deferral of principal repayments, which can be beneficial during periods of market volatility or economic downturn.

Moreover, the removal of the 0.10% credit spread adjustment linked to the SOFR benchmark could lead to a modest reduction in interest expenses, improving the company's interest coverage ratio and potentially its credit ratings. This action reflects a favorable lending environment and confidence from creditors in the company's financial health. The extension of maturities and reduction in interest rates should be well-received by investors, as it indicates a lower risk of financial distress and an improved debt profile. However, it is essential to monitor the company's future earnings and cash flow generation to ensure that the increased debt capacity does not lead to complacency in financial discipline.

Market Research Analyst

From a market perspective, Allison Transmission's amendment to its credit agreement can be seen as a strategic initiative to optimize its capital structure. The move to secure longer-term debt at potentially lower interest rates aligns with a conservative financial strategy that may be favored by investors seeking stability in uncertain economic times. This decision may signal to the market that Allison is positioning itself to weather potential economic headwinds by locking in favorable borrowing terms well in advance of their original maturity dates.

Investors and market participants often view such refinancing activities as an indication of a company's proactive financial management, which can have a positive effect on the company's stock performance. However, the impact on the stock market will also depend on broader industry trends and Allison's operational performance. The transportation sector, where Allison operates, is sensitive to economic cycles and the ability to secure favorable credit terms could provide a competitive edge. The company's focus on maintaining a low-cost debt structure while preserving the ability to prepay may be viewed as a strategic advantage, particularly if interest rates rise in the future.

INDIANAPOLIS--(BUSINESS WIRE)-- Allison Transmission Holdings Inc. (NYSE: ALSN) (“Allison” or the “Company”) announced today that, on March 13, 2024, its wholly owned subsidiary, Allison Transmission, Inc. (the “Borrower”), entered into a fourth amendment to its credit agreement (the “Amendment”).

Pursuant to the Amendment, the Borrower increased its commitments under its revolving credit facility from $650 million to an aggregate principal amount of $750 million, extended the maturity date thereof from 2025 to March 13, 2029, and removed a 0.10% credit spread adjustment to the SOFR benchmark for all available interest periods.

Also pursuant to the Amendment, the Borrower refinanced $518 million of term loan debt, paid down approximately $100 million of existing term loan debt, extended the maturity date thereof from 2026 to March 13, 2031, and removed a 0.10% credit spread adjustment to the SOFR benchmark for all available interest periods, while maintaining the SOFR plus 175 interest rate.

“The successful closing of this amendment supports our long-standing commitment to prudent balance sheet management and our opportunistic approach to the capital markets with a focus on a low-cost, flexible and pre-payable debt structure with long-date maturities,” said Fred Bohley, Senior Vice President, Chief Financial Officer and Treasurer at Allison. “As a result of this offering, we were able to increase the capacity under our revolving credit facility and reduce the effective interest rate on our term loan debt, while extending out maturities so that our earliest maturity on our long-term debt is now in 2027.”

About Allison Transmission

Allison Transmission (NYSE: ALSN) is a leading designer and manufacturer of propulsion solutions for commercial and defense vehicles and the largest global manufacturer of medium- and heavy-duty fully automatic transmissions that Improve the Way the World Works. Allison products are used in a wide variety of applications, including on-highway trucks (distribution, refuse, construction, fire and emergency), buses (school, transit and coach), motorhomes, off-highway vehicles and equipment (energy, mining and construction applications) and defense vehicles (tactical wheeled and tracked). Founded in 1915, the company is headquartered in Indianapolis, Indiana, USA. With a presence in more than 150 countries, Allison has regional headquarters in the Netherlands, China and Brazil, manufacturing facilities in the USA, Hungary and India, as well as global engineering resources, including electrification engineering centers in Indianapolis, Indiana, Auburn Hills, Michigan and London in the United Kingdom. Allison also has approximately 1,600 independent distributor and dealer locations worldwide. For more information, visit allisontransmission.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240318089254/en/

Jackie Bolles

Executive Director, Treasury and Investor Relations

Jacalyn.Bolles@allisontransmission.com

(317) 242-7073

Claire Gregory

Director, Global External Communications

Claire.Gregory@allisontransmission.com

(317) 694-2065

Source: Allison Transmission

What is the ticker symbol for Allison Transmission Holdings Inc.?

The ticker symbol for Allison Transmission Holdings Inc. is ALSN.

What was the increase in commitments under the revolving credit facility?

The Borrower increased its commitments under the revolving credit facility from $650 million to an aggregate principal amount of $750 million.

What was the change in maturity date for the term loan debt?

The maturity date of the term loan debt was extended from 2026 to March 13, 2031.

Who is the Senior Vice President, Chief Financial Officer, and Treasurer at Allison Transmission Holdings Inc.?

Fred Bohley is the Senior Vice President, Chief Financial Officer, and Treasurer at Allison Transmission Holdings Inc.