KBR’s Credit Facilities: What You Should Know
Off-balance sheet risks
As of September 30, 2017, KBR (KBR) has a long-term revolving credit agreement debt of $470 million, which is due in 2020.
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On September 25, 2015, KBR started a $1 billion, unsecured revolving credit agreement with a group of banks. The credit facility, which matures in September 2020, can be used for cash borrowing and the allotment of letters of credit to meet general corporate needs.
KBR funded $700 million of Wyle and HTSI (converted to KTS) purchases with borrowings under the credit facility, of which $470 million remains outstanding as of September 30, 2017.
Letters of credit
Letters of credit are granted to specific customers and counterparties in the usual course of trade as credit support. As of December 31, 2016, there was $85 million in letters of credit outstanding under the credit facility and $365 million allotted under uncommitted bank lines. Of the total letters of credit outstanding, $168 million is associated with KBR’s joint venture operations.
KBR has a 0.59 debt-to-equity, also known as leverage ratio. KBR’s peer (XLI) Fluor (FLR) has a leverage ratio of 0.49x. Chicago Bridge & Iron (CBI) has a debt-to-equity ratio of 1.87x, which is much higher than the industry average of 0.44x. Jacobs Engineering’s (JEC) debt-to-equity ratio is 0.05x. JEC’s low debt-to-equity ratio implies lower risk since debtors have minimal claims on the company’s assets. JEC has little debt, whereas CBI is highly leveraged.