Item 1.01. Entry into a Material Definitive Agreement.
On October 21, 2026 (the “Closing Date”), Watsco, Inc., a Florida corporation (the “Company”), entered into an unsecured, five-year $750.0 million syndicated multicurrency credit agreement (the “New Credit Facility”) with a syndicate of lenders (the “Lenders”), and Bank of America, N.A. as Administrative Agent (in such capacity, the “Administrative Agent”), Swing Line Lender and L/C Issuer.
The New Credit Facility replaces in its entirety the Company’s unsecured $600.0 million revolving credit facility, entered into as of March 16, 2023 (the “Prior Credit Facility”). On the Closing Date, the Company borrowed $69.7 million under the New Credit Facility, the proceeds of which were used to repay outstanding borrowings under the Prior Credit Facility. Any additional borrowings under the New Credit Facility may be used for, among other things, funding seasonal working capital needs and other general corporate purposes, including acquisitions, dividends, capital expenditures, stock repurchases and issuances of letters of credit.
The terms of the New Credit Facility also provide for a $125.0 million swing line loan sublimit, a $10.0 million letter of credit sublimit, and a $150.0 million borrowing sublimit for multicurrency borrowings in Euros, Pounds Sterling and Canadian Dollars. As of the Closing Date, $69.7 million of borrowings were outstanding under the New Credit Facility. The New Credit Facility additionally provides for a seasonal period from September 1 to March 1 of each calendar year, during which the Company may elect in its discretion to reduce borrowing capacity by $100.0 million, $200.0 million, or $300.0 million. Additionally, the New Credit Facility permits up to $375.0 million of incremental revolving increases or term loans, with up to six requests.
Borrowings under the New Credit Facility accrue interest at different rates depending on the types of advances or loans the Company selects. At the Company’s election, borrowings under the New Credit Facility bear interest either at Term SOFR or Daily Simple SOFR-based rates plus a spread that ranges from 100.0 to 137.5 basis-points (100.0 basis-points as of the Closing Date), depending upon the loan type and the Company’s ratio of total debt to EBITDA, or, for U.S. dollar-denominated loans only, rates based on the highest of (i) the Federal Funds Rate plus 0.5%, (ii) the prime rate announced by the Administrative Agent, (iii) one-month Term SOFR plus 1.0%, and (iv) 1.0%, in each case plus a spread that ranges from 0 to 50 basis-points (0 basis-points as of the Closing Date), depending upon the Company’s ratio of total debt to EBITDA. The Company pays a variable commitment fee on the unused portion of the commitment under the New Credit Facility, ranging from 10.0 to 17.5 basis-points (10.0 basis-points as of the Closing Date).
The outstanding balance under the New Credit Facility may be prepaid at any time without premium or penalty. The New Credit Facility contains customary affirmative and negative covenants, including two financial covenants with respect to the Company’s consolidated leverage and interest coverage ratios, and other customary restrictions. Additionally, the New Credit Facility contains customary events of default and remedies upon an event of default, including termination of the commitments of the Lenders and the acceleration of repayment of outstanding amounts under the New Credit Facility.
The Company’s performance and payment obligations under the New Credit Facility are guaranteed by substantially all of the Company’s wholly owned subsidiaries.
The foregoing description of the New Credit Facility is only a summary and is qualified in its entirety by reference to the complete text of the New Credit Facility, which is attached as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.
Item 1.02. Termination of a Material Definitive Agreement.
The information set forth in Item 1.01 of this Current Report on Form 8-K with respect to the Prior Credit Facility is incorporated by reference in this Item 1.02.
On the Closing Date, in connection with entering into the New Credit Facility, the Prior Credit Facility terminated. The Company borrowed $69.7 million under the New Credit Facility, the proceeds of which were used to repay outstanding borrowings under the Prior Credit Facility. Additionally, under the terms of the New Credit Facility, a $150,000 letter of credit outstanding under the Prior Credit Facility will remain outstanding in accordance with its existing terms and reduce the availability under the New Credit Facility by the amount of such letter of credit. The New Credit Facility matures on October 21, 2031.
The Company incurred no penalties in connection with the termination of the Prior Credit Facility. The material terms of the Prior Credit Facility are described in the Company’s 2025 Annual Report to Shareholders under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Revolving Credit Agreement”, filed as Exhibit 13 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2026, and such description is incorporated herein by reference.