SMITH A O CORP 8-K

What Happened

• A. O. Smith Corporation filed an 8-K reporting that on January 5, 2026 it entered into a Credit Agreement with various lenders (Bank of America, N.A. as administrative agent) providing an unsecured $470 million term loan, and that it used the loan proceeds to fund the acquisition of LVC Holdco LLC ("Leonard Valve") and related fees and expenses. The acquisition of Leonard Valve (and its Heat-Timer brand) was consummated on January 6, 2026. The term loan matures January 5, 2029.

Key Details

• Loan amount: $470 million unsecured term loan; borrowed in full on January 5, 2026.
• Use of proceeds: finance Leonard Valve acquisition and associated fees/expenses (acquisition closed Jan 6, 2026).
• Interest: borrower option of (i) Term SOFR + 0.875%–1.375% margin or (ii) Base Rate + 0%–0.375% margin; margins depend on A. O. Smith’s leverage ratio.
• Covenants & limits: requires maximum leverage ratio of 0.60 (temporarily up to 0.65 for certain material acquisitions), minimum interest coverage ratio of 3.0x, and contains customary restrictions on liens, mergers, subsidiary indebtedness and dispositions; loans can be prepaid without penalty.
• Default provisions: lenders may accelerate obligations on customary events of default; certain defaults trigger an additional 2.0% per annum interest premium.

Why It Matters

• The filing documents how A. O. Smith financed a strategic acquisition (Leonard Valve) with a sizable unsecured term loan rather than longer-term debt or equity, which affects the company’s near-term leverage and interest-cost profile. Investors should note the financial covenants (leverage and interest coverage) that the company must maintain, the maturity date (Jan 5, 2029), and the interest-rate structure tied to SOFR or a base rate, all of which can influence cash flow and flexibility. The company also filed a related news release announcing the acquisition.