TDG · 10-Q · 2026Q2 · Full report
Debt Covenant Compliance
TransDigm Group INC · 2026-08-04 · Importance 25 · Surprise 6 · In source text
TransDigm’s Credit Agreement and note indentures restrict additional indebtedness, special dividends, affiliate transactions, asset sales, acquisitions, mergers, liens and certain debt prepayments. Incremental term loans or revolving commitments generally require a pro forma consolidated net leverage ratio no greater than 7.25x and secured net debt ratio no greater than 5.00x. If revolving-facility usage exceeds 40%, currently $364 million, the Company must maintain a maximum consolidated net leverage ratio of 7.50x, or 8.00x during the first four fiscal quarters after a material acquisition. As of June 27, 2026, TransDigm was in compliance with all debt covenants and expected to remain compliant in subsequent periods.
Key facts
- If usage of the revolving credit facility exceeds 40% (or, currently, $364 million) of total revolving commitments, the Company is required to maintain a maximum consolidated net leverage ratio of 7.50x (or 8.00x solely with respect to the first four fiscal quarters after a material acquisition) as of the last day of the fiscal quarter source
- If a default occurs under the Credit Agreement, lenders and holders of the Subordinated Notes and Secured Notes may elect to declare all outstanding borrowings immediately due and payable and terminate commitments to provide further borrowings source
- Following an event of default under the Credit Agreement, the lenders and holders of the Secured Notes will have the right to proceed against the collateral secured to them, which includes the Company’s available cash, and to prevent the Company from making debt service payments on the Notes source
- TransDigm may request additional term loans or revolving commitments provided consolidated net leverage ratio would be no greater than 7.25x and consolidated secured net debt ratio would be no greater than 5.00x after giving effect to such incremental borrowings source
- As of June 27, 2026, the Company was in compliance with all of its debt covenants and expects to remain in compliance in subsequent periods source
- The Credit Agreement and the indentures governing the Subordinated Notes and Secured Notes contain restrictive covenants that limit incurrence of additional indebtedness, payment of special dividends, transactions with affiliates, asset sales, acquisitions, mergers and consolidations, liens and encumbrances, and prepayments of certain other indebtedness source
- EBITDA and EBITDA As Defined are used by management for evaluating operating performance and liquidity and to comply with the revolving credit facility covenant measuring secured indebtedness to Consolidated EBITDA defined as EBITDA As Defined source
- Amendment No. 15 to the Credit Agreement, executed on March 22, 2024, was the most recent amendment that impacted the restrictive covenants source
Impact estimates
| metric | direction | stage | expected | basis |
|---|---|---|---|---|
| liability | negative | contingent | — | If usage of the revolving credit facility exceeds 40% (or, currently, $364 million) of total revolving commitments, the Company is… |
| liability | negative | contingent | — | If a default occurs under the Credit Agreement, lenders and holders of the Subordinated Notes and Secured Notes may elect to declare all… |
| liability | negative | contingent | — | Following an event of default under the Credit Agreement, the lenders and holders of the Secured Notes will have the right to proceed… |