Oracle Corp (ticker: ORCL) has taken significant steps towards reducing its indebtedness by borrowing a total of $5.7 billion under its Term Loan Credit Agreement in fiscal 2023. The tech giant borrowed $4.4 billion on August 16, 2022, and an incremental $1.3 billion on November 2, 2022. Proceeds from these borrowings were used to reduce Oracle’s outstanding debt under the Bridge Credit Agreement. This showcases the company’s strategic financial management and efforts to strengthen its balance sheet.
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Effective Interest Rate and Repayment Terms
The effective interest rate for these borrowings during fiscal 2023 was 5.76%. The Term Loan Credit Agreement’s repayment terms follow a structured approach, consisting of periodic repayments of borrowed amounts (reduced by any prepayments) and full repayment of the remaining unpaid principal balances on specific due dates. For instance, any remaining unpaid principal balance under the Term Loan 1 Facility will be due and payable on August 16, 2027, and the Term Loan 2 Facility on August 16, 2025.
Moreover, Oracle has the option to extend the termination date of the Term Loan 2 Facility by up to 2 years, while each lender has the option to extend the termination date of both Term Loan Facilities by up to 2 years. This provides Oracle with greater flexibility in managing its debt repayment obligations. The interest rates for the loan are based on either a Term SOFR-based formula or a Base Rate formula plus a margin, depending on the credit rating assigned to Oracle’s long-term senior unsecured debt.
Managing Interest Rate Risk with Swap Agreements
To manage its interest rate risk, Oracle entered into interest rate swap agreements in August 2022. These agreements amounted to $4.4 billion, effectively converting the floating-rate to a fixed-rate by eliminating the uncertainty of cash flows associated with floating-rate interest payments. The fixed annual interest rate is set at 3.07%, plus a margin depending on the credit rating assigned to Oracle’s long-term senior unsecured debt. This move demonstrates the company’s proactive approach to managing its financial risks and exposures.
Deferred Revenues, Restructuring Activities, and Other Commitments
In addition to managing its borrowing activities, Oracle continues to monitor and address its deferred revenues, restructuring activities, and other commitments. As of May 31, 2023, the company’s total deferred revenues amounted to $9.9 billion, reflecting advance payments from customers for cloud or support contracts, prepayments for services, and undelivered products and services.
Oracle has also implemented restructuring plans focused on improving operational efficiencies, such as the Fiscal 2022 Oracle Restructuring Plan and the Fiscal 2019 Oracle Restructuring Plan. These plans include various actions to restructure operations due to acquisitions and other operational activities. The total costs recorded in connection with the 2022 Restructuring Plan amounted to $716 million, while the 2019 Restructuring Plan incurred costs totaling $1.2 billion.
In conclusion, Oracle Corp’s strategic borrowing activities, proactive interest rate risk management, and ongoing attention to restructuring plans and commitments demonstrate the company’s commitment to maintaining a strong financial position. By leveraging its financial resources and focusing on operational efficiencies, Oracle is well-positioned for sustained growth and enhanced shareholder value.
Financials in millions USD. Fiscal year is June – May. source
|Year||2022||2021||2020||2019||2018||2017||2016||2015||2014||2013||2012 – 1992|
|1||Revenue Growth (YoY)||4.84%||3.61%||-1.11%||0.31%||4.21%||2.01%||-3.08%||-0.13%||2.95%||0.16%||Upgrade|
|2||Cost of Revenue||8877||7855||7938||7995||8060||7452||7479||7532||7236||7379||Upgrade|
|4||Selling, General & Admin||9364||8936||9275||9774||9715||9257||9039||8732||8605||8134||Upgrade|
|5||Research & Development||7219||6527||6067||6026||6084||6153||5787||5524||5151||4850||Upgrade|
|6||Other Operating Expenses||6054||1948||1892||2176||2260||2017||2138||2567||2524||2133||Upgrade|
|9||Interest Expense / Income||2755||2496||1995||2082||2025||1798||1467||1143||914||797||Upgrade|
|10||Other Expense / Income||522||-282||-162||-815||-1185||-565||-305||-106||141||-11||Upgrade|
|14||Net Income Growth||-51.13%||35.63%||-8.55%||208.98%||-62.05%||6.19%||-10.43%||-9.28%||0.27%||9.46%||Upgrade|
|15||Shares Outstanding (Basic)||2700||2945||3211||3634||4121||4115||4221||4404||4528||4769||Upgrade|
|16||Shares Outstanding (Diluted)||2786||3022||3294||3732||4238||4217||4305||4503||4604||4844||Upgrade|
|21||Free Cash Flow Per Share||1.86||4.67||3.60||3.55||3.31||2.94||2.96||3.00||3.17||2.85||Upgrade|
|22||Dividend Per Share||1.280||1.040||0.960||0.810||0.760||0.640||0.600||0.510||0.480||0.300||Upgrade|
|27||Free Cash Flow Margin||11.85%||33.97%||29.63%||32.63%||34.66%||32.03%||33.73%||34.50%||37.47%||36.51%||Upgrade|
|28||Effective Tax Rate||12.18%||-5.75%||15.98%||9.66%||71.13%||19.08%||22.21%||22.57%||20.06%||21.39%||Upgrade|
|31||Depreciation & Amortization||3122||2916||2968||2919||2785||2451||2509||2861||2908||2931||Upgrade|
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