Herman Miller Credit Agreement: Understanding the Basics
Herman Miller, Inc. is a renowned furniture manufacturer based in Zeeland, Michigan, that designs and produces high-quality office furniture, architectural and design solutions, and related services. It has a history of over 100 years of innovation in design and sustainability and has numerous patents to its credit.
Like any other business, Herman Miller requires capital to expand its operations and invest in new initiatives. While it has various sources of funding, including equity and debt financing, this article will focus on Herman Miller`s credit agreement.
What is a Credit Agreement?
A credit agreement is a legally binding document between a borrower and a lender that outlines the terms and conditions of a loan. It lays out the amount of money being borrowed, the interest rate, repayment schedule, and other pertinent details such as the borrower`s obligations, collateral and default provisions.
Herman Miller`s Credit Agreement:
In August 2021, Herman Miller entered into a $300 million credit agreement with JPMorgan Chase Bank, N.A, as administrative agent, and other lenders. The agreement provides the company with a revolving credit facility that enables it to draw funds when needed and repay it over time.
The revolving credit facility is structured as a five-year deal that offers the option of extending it for an additional year subject to certain conditions. It also allows Herman Miller to increase its borrowing capacity by up to $100 million, subject to the agreement`s terms and conditions.
The credit agreement includes various covenants that Herman Miller must adhere to, such as maintaining its financial ratios, providing timely financial statements and other disclosures, and avoiding certain actions that could trigger a default. In return, the company enjoys favorable interest rates and flexible borrowing terms that enable it to manage its cash flow efficiently.
Why does Herman Miller Need Credit?
Herman Miller`s credit agreement is a means for the company to obtain short-term financing for its working capital needs, such as paying suppliers, employees, and other expenses. It also serves as a backup source of funding to support its long-term growth plans. The credit facility provides Herman Miller with the flexibility to manage its cash flow during fluctuating demand cycles and economic conditions.
A credit agreement is an essential tool for businesses looking to obtain financing to support their operations and growth plans. Herman Miller`s credit agreement is an example of a well-structured facility that provides the company with the flexibility to manage its cash flow efficiently. As a company committed to innovation and sustainability, Herman Miller`s credit agreement aligns with its values and enables it to continue its mission of creating inspiring designs and spaces that enhance people`s lives.