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SEC Filings

10-Q
INTERPUBLIC GROUP OF COMPANIES, INC. filed this Form 10-Q on 07/27/2017
Entire Document
 

Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)


The table below sets forth the financial covenants in effect as of June 30, 2017.
 
 
Four Quarters Ended
 
 
 
Four Quarters Ended
Financial Covenants
 
June 30, 2017
 
EBITDA Reconciliation
 
June 30, 2017
Interest coverage ratio (not less than) 1
 
5.00x
 
Operating income
 
$
929.9

Actual interest coverage ratio
 
18.48x
 
Add:
 
 
Leverage ratio (not greater than) 1
 
3.50x
 
Depreciation and amortization
 
256.4

Actual leverage ratio
 
1.54x
 
EBITDA 1
 
$
1,186.3

 
1
The interest coverage ratio is defined as EBITDA, as defined in the Credit Agreement, to net interest expense for the four quarters then ended. The leverage ratio is defined as debt as of the last day of such fiscal quarter to EBITDA for the four quarters then ended.
We also have uncommitted lines of credit with various banks which permit borrowings at variable interest rates and which are primarily used to fund working capital needs. We have guaranteed the repayment of some of these borrowings made by certain subsidiaries. If we lose access to these credit lines, we would have to provide funding directly to some of our international operations. As of June 30, 2017, the Company had uncommitted lines of credit in an aggregate amount of $906.5, under which we had outstanding borrowings of $237.7 classified as short-term borrowings on our Consolidated Balance Sheet. The average amount outstanding during the second quarter of 2017 was $457.6, with a weighted-average interest rate of approximately 2.2%.
Commercial Paper
In June 2017, the Company established a commercial paper program under which the Company may issue unsecured commercial paper up to a maximum aggregate amount outstanding at any time of $1,000.0. Borrowings under the program are supported by the Credit Agreement described above. Proceeds of the commercial paper will be used for working capital and general corporate purposes, including the repayment of maturing indebtedness, as described above, and other short-term liquidity needs. The maturities of the commercial paper vary but may not exceed 397 days from the date of issue. As of June 30, 2017, there was no commercial paper outstanding. From the date the program was first utilized through June 30, 2017, the average amount outstanding under the program was $203.7, with a weighted-average interest rate of 1.4% and a weighted-average maturity of seven days.
Cash Pooling
We aggregate our domestic cash position on a daily basis. Outside the United States, we use cash pooling arrangements with banks to help manage our liquidity requirements. In these pooling arrangements, several IPG agencies agree with a single bank that the cash balances of any of the agencies with the bank will be subject to a full right of set-off against amounts that other agencies owe the bank, and the bank provides for overdrafts as long as the net balance for all the agencies does not exceed an agreed-upon level. Typically, each agency pays interest on outstanding overdrafts and receives interest on cash balances. Our unaudited Consolidated Balance Sheets reflect cash, net of bank overdrafts, under all of our pooling arrangements, and as of June 30, 2017, the amount netted was $1,512.9.
DEBT CREDIT RATINGS
Our debt credit ratings as of July 17, 2017 are listed below.
 
Moody’s Investors Service
 
S&P Global Ratings
 
Fitch Ratings
Short-term rating
P-2
 
A-2
 
F2
Long-term rating
Baa2
 
BBB
 
BBB
Outlook
Stable
 
Stable
 
Positive
We are rated investment-grade by Moody's Investors Service, S&P Global Ratings and Fitch Ratings. On June 8, 2017, we received from the credit rating agencies the short-term credit ratings, described above, with respect to our commercial paper. The most recent update to our long-term credit ratings occurred in April 2017 when S&P Global Ratings upgraded our rating from BBB- to BBB with a Stable outlook. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning credit rating agency. The rating of each credit rating agency should be evaluated independently of any other rating. Credit ratings could have an impact on liquidity, either adverse or favorable, because, among other things, they could affect funding costs in, or the ability to access, the capital markets or otherwise. For example, our Credit Agreement fees and borrowing rates are based on a long-term credit ratings grid.

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