Revolver Watch: Duke Draws $1 Billion

Duke Energy Corp (DUK) is drawing $1 billion under its $3.2 billion master credit agreement. The move has sent jitters through credit markets, worried that other corporate financial officers will begin drawing down on revolving loans in an effort to bolster their liquidity.

“In light of the uncertain market environment, we made this proactive financial decision to increase our liquidity and cash position and to bridge our access to the debt capital markets” Duke chief financial officer David Hauser said. “This improves our flexibility as we continue to execute our business plans.”

Translation: Duke has $650 million in bonds coming due this year, and $442 million scheduled to mature next year, according to Bloomberg. It’s borrowing the money now because it is unclear that the credit markets will be open to new corporate bond issuances in time to rollover the outstanding bonds.

This isn’t quite a run on the bank—Duke doesn’t necessarily think it’s lender is going under—but it can have the same effect. Massive draw downs on revolving loan commitments by corporate America could leave banks with depleted capital, forcing them to raise additional capital or face a FDIC organised takover or shutdown.

But let’s not hit the panic button yet. The credit markets did get some good news today, when Ford announced it had repaid $1.5 billion in debt that was due today without drawing on its revolver.

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