An investment in the Notes involves risks. You should carefully consider the risks and uncertainties described in this prospectus supplement and the accompanying prospectus, including the risk factors set forth in the documents and reports filed with the SEC that are incorporated by reference in this prospectus supplement and in the accompanying prospectus, such as the risk factors under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020, and in our Quarterly Report on Form 10-Q for the nine-month period ended September 30, 2021, which are incorporated by reference herein and are on file with the SEC, before you make an investment decision pursuant to this prospectus supplement and the accompanying prospectus. Otis’ and its subsidiaries’ business, financial condition, operating results and cash flows can be impacted by the factors set forth below and in such documents and reports. In this “Risk Factors” section, “Otis,” refers to Otis Worldwide Corporation and any successor obligor and not to any of its subsidiaries. In this “Risk Factors” section, the “Issuer” or “Highland,” refers to Highland Holdings S.à r.l. and any successor obligor and not to any of its subsidiaries.
Risks Related to the Notes
In addition to the indebtedness that will be issued in this offering, Otis and its subsidiaries have significant outstanding indebtedness, including outstanding notes and commercial paper, and significant unused borrowing capacity under the Revolving Credit Facility and the Bridge Credit Facility. The terms of the Revolving Credit Facility, the Bridge Credit Facility, the Existing Indenture and the Indenture will, and the terms of any future indebtedness may, restrict the activities of Otis and its subsidiaries.
On February 10, 2020, Otis and its wholly-owned subsidiary, Otis Intercompany Lending Designated Activity Company, as borrowers, entered into a credit agreement providing for a $1.5 billion unsecured, unsubordinated five-year revolving credit facility (the “Revolving Credit Facility”). As of September 30, 2021, there were no amounts outstanding under the Revolving Credit Facility.
On February 27, 2020, Otis issued $5.3 billion in debt securities pursuant to the Indenture, dated as of February 27, 2020, between Otis and The Bank of New York Mellon Trust Company, N.A. (as supplemented, the “Existing Indenture”), the net proceeds of which were distributed to United Technologies Corporation prior to the Separation.
As of September 30, 2021, Otis had an aggregate of $1.5 billion unsecured, unsubordinated commercial paper programs in place with no commercial paper outstanding.
On March 11, 2021, Otis issued ¥21.5 billion Japanese Yen denominated (approximately $194 million as of September 30, 2021), unsecured, unsubordinated five-year notes due March 2026 pursuant to the Existing Indenture. The proceeds from the issuance of the Japanese Yen-denominated notes were used to repay a portion of Otis’ outstanding Euro-denominated commercial paper.
In connection with the Tender Offer, on September 22, 2021, Otis entered into the Bridge Credit Facility, as guarantor, with Opal, as borrower, the lenders from time to time party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent. The Bridge Credit Facility provides Opal with a €1.65 billion term loan facility.
The Revolving Credit Facility, the Bridge Credit Facility and the Existing Indenture impose, and the Indenture will impose, restrictions on Otis and certain subsidiaries, including certain restrictions customary for financings of these types that, among other things, limit the ability to incur additional liens, to make certain fundamental changes and to enter into sale and leaseback transactions. In addition, the Revolving Credit Facility and Bridge Credit Facility require Otis to comply with a maximum consolidated total net debt to EBITDA leverage ratio. The Revolving Credit Facility, Bridge Credit Facility and the Existing Indenture contain, and the Indenture will contain, events of default customary for financings of these types.
The ability of Otis and its subsidiaries, as applicable, to comply with such restrictions and covenants may be affected by events beyond their control. If Otis or its subsidiaries, as applicable, breaches any of these restrictions or covenants and does not obtain a waiver from the lenders or holders, as applicable, then, subject to the applicable cure periods and conditions, any outstanding indebtedness under the Revolving Credit Facility, the Bridge Credit Facility, the Existing Indenture or the Indenture, as applicable, could be declared immediately due and payable. Otis and its subsidiaries may incur significantly more indebtedness in the future by drawing under the Revolving Credit Facility, the Bridge Credit Facility or otherwise.