Note L — Short-term Financing

The Company maintains committed and unsecured credit facilities and irrevocable letters of credit as part of its normal and recurring business operations. The purpose of these credit facilities is to meet short-term funding requirements, finance working capital needs, and for general corporate purposes. The Company typically borrows on an overnight or short-term basis on its credit facilities.

Upon the expiration date of any credit facility, any borrowings outstanding under that facility will mature and be payable.

Interest rates on each of the Company’s credit facilities can be based upon (1) an alternate base rate that is established by the lending institution at the highest of several publicly available interest rates, plus an applicable interest rate margin, or (2) at our election, London Interbank Offered Rate (“LIBOR”) or an alternate interest rate as determined by the administrative agent, plus an applicable interest rate margin. The Company is also required to pay a commitment fee, ranging from 0.05% to 0.15%, related to the unutilized portion of each credit facility. The commitment fee is determined on a sliding-scale basis based upon the Company’s consolidated leverage ratio.

On February 3, 2023, Paychex Advance LLC, a Paychex subsidiary and New York limited liability company, and Paychex entered into Amendment No. 2 (the “Amendment”) to the $250 million, three-year, unsecured, revolving credit facility established on February 6, 2020 (the “2020 Credit Facility”) for which PNC Bank, N.A. acts as administrative agent.

The Amendment, among other things, extended the maturity date of the 2020 Credit Facility from February 6, 2023 to February 6, 2026 at which time all borrowings thereunder will terminate. Except for extending the maturity date and making ministerial changes to the 2020 Credit Facility, the Amendment did not change the existing terms of the 2020 Credit Facility.

On September 17, 2021, the Company amended its $500.0 million credit facility with JPM to increase the credit facility’s maximum borrowing capacity to $750.0 million, extend the term through September 17, 2026 with the option to extend for two additional one-year periods, and amend interest rate provisions to phase out the use of LIBOR. In addition, the Company amended its $1.0 billion credit facility with JPM. The amendment phases out the use of LIBOR and adopts other administrative changes to maintain consistency with the Company’s other credit facilities.

Obligations under the credit facilities are guaranteed by the Company and certain of its subsidiaries. The credit facilities contain financial and operational covenants with which the Company must maintain compliance. The Company’s ability to borrow under the credit facilities may be restricted in the event of certain covenant breaches or events of default. In addition, the terms of the credit facilities could restrict the Company’s ability to engage in certain business transactions. The Company was in compliance with all these covenants as of May 31, 2023.

Certain lenders under these credit facilities, and their respective affiliates, have performed, and may in the future perform for the Company, various commercial banking, investment banking, underwriting, and other financial advisory services, for which they have received, and will continue to receive in the future, customary fees and expenses.

Letters of credit: The Company had irrevocable standby letters of credit outstanding totaling $141.7 million and $140.2 million as of May 31, 2023 and May 31, 2022, respectively, required to secure commitments for certain insurance policies. The letters of credit expire at various dates between June 9, 2023 and May 25, 2024. No amounts were outstanding on these letters of credit during fiscal 2023 or fiscal 2022, or as of May 31, 2023 and May 31, 2022, respectively. Subsequent to May 31, 2023, letters of credit expiring on June 9, 2023, June 15, 2023, and June 26, 2023 were renewed for one year terms.