Paychex, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Short-term Financing

Short-term Financing

9 Months Ended

Feb. 29, 2020

Financing [Abstract]

Short-term Financing

Note L: Short-term Financing

The Company maintains credit facilities and letters of credit as part of its normal and recurring business operations.

Credit Facilities: The Company maintains three committed, unsecured credit facilities, as follows:



Bank	Borrower ⁽¹⁾	Date Entered	Expiration Date	Maximum Amount Available	Purpose
JP Morgan Chase Bank, N.A. ("JPM")⁽²⁾	Paychex of New York, LLC ("PoNY")	July 31, 2019	July 31, 2024	$1 Billion	To meet short-term funding requirements.
JPM ⁽²⁾	PoNY	August 17, 2017	August 17, 2022	$500 Million	To meet short-term funding requirements.
PNC Bank, National Association ("PNC")	Paychex Advance, LLC	February 6, 2020	February 6, 2023	$250 Million	To finance working capital needs and general corporate purposes.

(1)Borrower is a wholly owned subsidiary of the Company.

(2)JPM acts as the administrative agent for this syndicated credit facility.

On February 6, 2020, the Company and its subsidiary, Paychex Advance, LLC, entered into a credit agreement with a lender which established a new $250.0 million three-year unsecured revolving credit facility (“2020 credit facility”). Under this new credit facility, Paychex Advance, LLC may borrow at an alternate base rate provided by PNC or at an adjusted LIBOR-based interest rate provided by PNC. This revolving credit facility replaced the Paychex Advance, LLC predecessor $150.0 million four-year unsecured revolving credit facility that was entered into on March 17, 2016 (“2016 predecessor credit facility”) and terminated on February 6, 2020.

On July 31, 2019, the Company and its subsidiary, PoNY, entered into a credit agreement with a group of lenders which established a new $1.0 billion five-year unsecured revolving credit facility (“2019 credit facility”). Under this new credit facility, the Company may borrow at the alternate base rate provided by JPM or at an adjusted LIBOR-based interest rate provided by JPM. This revolving credit facility replaced the Company’s predecessor $1.0 billion five-year unsecured revolving credit facility that was entered into on August 5, 2015 (“2015 predecessor credit facility”) and terminated on July 31, 2019.

For all credit facilities, obligations under any facility are guaranteed by the Company and certain of its subsidiaries and will bear interest at competitive rates based on options provided to the borrower. Upon the expiration date, any borrowings outstanding will mature and be payable on such date.

JPM $1 Billion Credit Facility: There were no borrowings outstanding under the 2019 credit facility as of February 29, 2020 or the 2015 predecessor credit facility as of May 31, 2019. Details of borrowings under the 2019 credit facility and the 2015 predecessor credit facility during the three and nine months ended February 29, 2020 and February 28, 2019 are as follows:


	For the three months ended						For the nine months ended
		February 29,			February 28,			February 29,			February 28,
$ in millions	2020			2019			2020			2019
Number of days borrowed		—			71			16			81
Maximum amount borrowed	$	—		$	400.0		$	694.0		$	483.0
Weighted-average amount borrowed	$	—		$	400.0		$	357.1		$	385.9
Weighted-average interest rate		—	%		3.48	%		5.09	%		3.66	%

The Company typically borrows on an overnight basis and only borrowed on an overnight basis during the nine months ended February 29, 2020. There were no borrowings during the three months ended February 29, 2020. During the three and nine months ended February 28, 2019, the Company borrowed $400.0 million for 71 days at a weighted-average LIBOR-based interest rate of 3.48% to temporarily fund the acquisition of Oasis.

JPM $500 Million Credit Facility: There were no borrowings outstanding under this credit facility as of February 29, 2020 or May 31, 2019. Details of borrowings under this credit facility during the three and nine months ended February 29, 2020 and February 28, 2019 are as follows:



	For the three months ended						For the nine months ended
	February 29,			February 28,			February 29,			February 28,
$ in millions	2020			2019			2020			2019
Number of days borrowed		3			71			27			78
Maximum amount borrowed	$	273.0		$	400.0		$	450.0		$	400.0
Weighted-average amount borrowed	$	168.2		$	400.0		$	323.4		$	374.1
Weighted-average interest rate		4.75	%		3.48	%		3.30	%		3.57	%

The Company typically borrows on an overnight basis and only borrowed on an overnight basis during the three months ended February 29, 2020. In addition to overnight borrowings, during the nine months ended February 29, 2020, the Company borrowed:

$400.0 million for ten days at a weighted-average LIBOR-based interest rate of 3.00%;

$64.0 million for three days at a weighted-average interest rate of 4.75%; and

$450.0 million for eight days at a weighted-average LIBOR-based interest rate of 3.00%.

During the three and nine months ended February 28, 2019, the Company borrowed $400.0 million for 71 days at a weighted-average LIBOR-based interest rate of 3.48% to temporarily fund the acquisition of Oasis.

PNC $250 Million Credit Facility: As of February 29, 2020, the Company had $51.2 million outstanding under the 2020 credit facility, which remains outstanding as of the date of this report. There were no borrowings outstanding under the 2016 predecessor credit facility as of May 31, 2019. Details of borrowings under the 2020 credit facility and the 2016 predecessor credit facility during the three and nine months ended February 29, 2020 and February 28, 2019 are as follows:


	For the three months ended						For the nine months ended
	February 29,			February 28,			February 29,			February 28,
$ in millions	2020			2019			2020			2019
Number of days borrowed		91			90			270			269
Maximum amount borrowed	$	141.3		$	58.9		$	141.3		$	58.9
Weighted-average amount borrowed	$	52.3		$	57.7		$	53.8		$	57.0
Weighted-average interest rate		2.55	%		2.94	%		2.79	%		2.72	%

All of the Company’s credit facilities contain various financial and operational covenants that are usual and customary for such arrangements. The Company was in compliance with all of these covenants as of February 29, 2020.

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 $147.4 million and $148.9 million as of February 29, 2020 and May 31, 2019, respectively, required to secure commitments for certain insurance policies. The letters of credit expire at various dates between April 1, 2020 and February 5, 2021. No amounts were outstanding on these letters of credit as of, or during the nine months ended February 29, 2020 and February 28, 2019, or as of May 31, 2019.