Watsco signs $750 million credit facility to fund needs and expansion
Key Facts
Watsco signed a $750 million senior unsecured revolving credit facility, according to Investing, allowing it to fund needs including working capital, acquisitions and dividends. The new facility has a term of 5 years, and the company used borrowings under it to repay $69.7 million in existing loans. The transaction thus combined refinancing existing borrowing with making credit available for additional uses announced by the company. These uses include funding working capital, supporting acquisitions and paying dividends to shareholders. The announcement specified the purposes of additional borrowing as "working capital, acquisitions and dividends," according to Investing. Acquisitions are among these purposes as Watsco seeks to expand its share of the North American distribution market.
The new facility is larger than a previous $600 million revolving facility announced by Watsco, according to a statement published on the company's investor relations website. The previous facility was also unsecured, a feature shared by the new agreement. Under the previous financing arrangements, Watsco linked the facility to the Secured Overnight Financing Rate in preparation for the discontinuation of the London Interbank Offered Rate. The company said in its earlier announcement that "this facility is linked to the new Secured Overnight Financing Rate." The transition to that benchmark was part of the previous facility's arrangements, while the current agreement increases available credit and refinances existing loans.
As part of its expansion through acquisitions, Watsco announced the completion of its purchase of The Granite Group, a diversified distributor of plumbing, heating, ventilation and air conditioning products with sales of about $500 million. According to the statement announcing the transaction's completion on the investor relations website, the acquired group's operations combine the distribution of plumbing products with heating and air conditioning products. Watsco had said when announcing the acquisition agreement that The Granite Group serves about 11,000 customers. The group operates through a network of 82 locations, according to the same announcement. The deal is part of Watsco's strategy to expand its share through additional acquisitions in the North American distribution market. The company estimates the size of that market at about $74 billion, according to the acquisition agreement announcement, which outlined the scope of the market targeted for expansion.
On financial performance, Watsco reported in its second-quarter results disclosure that revenue rose 2% from the corresponding period. Revenue totaled $2.1 billion during that quarter, according to the company's disclosure. Watsco also reported holding $464 million in cash and cash investments when it announced the results. It said it had no debt at the time, a financial position relating to the second-quarter results period preceding the current refinancing announcement. The company will release its next results before the market opens on October 27, 2026, according to the date set on its investor relations website.