I woke up to the news that Cummins, the company you trust for diesel engines, just signed two $2 billion credit lines with JPMorgan. TipRanks’ Spark analyst still calls their stock an Outperform. That is like praising a dish before it’s even had a chance to cool. In reality, a company with a $44 billion market cap swapping old loans for new unsecured lines almost never means cash flow is overflowing. It usually means patching a crack in the ceiling before the inspector arrives.
Here’s the situation. On June 2, Cummins replaced its maturing credit agreements with two new revolving loans – one maturing in 2028, the other in 2030 – each allowing up to $2 billion in borrowing power. Interest rates float with their credit rating, and the usual covenants apply. Head into any bar conversation among investors and you’ll hear the same question: Why grab $4 billion in spare credit when profit margins are sliding and free cash flow is drying up?
But here’s the accountability part – who inside Cummins is asking the hard questions? Or are they all just nodding along while the debt piles up and the fundamentals decay?
That gap between hype and reality is wide. Spark’s bullish refrain might as well be a polished press release. Yet Cummins still needs fresh debt to keep going. Imagine a kitchen where the chef brags about awards while the dish pit is flooded. Cummins wants everyone focused on the Outperform rating, the sleek credit facility, and a promised surge in hydrogen revenue by 2025. Behind that stainless-steel façade, margins bleed, investors abandon ship, and now they’re borrowing against next year’s hope.
Refinancing large loans as growth stalls isn’t a power move. It’s a lifeline. They tell shareholders they’re flush while quietly signalling they need more runway or the plane crashes. Spark can keep polishing that diamond in the rough, but any experienced investor knows – if a kitchen needs $4 billion just to stay hot, the whole operation is in trouble.
Here’s the twist. Word is that one of the biggest names in tech is quietly prowling around, sniffing for a partner in clean power. If that prospect vanishes because of an unresolved mess, Cummins’ playbook collapses. Rollover debt into new unsecured loans is just garnish. It’s not a sign of strength. Next time Spark purrs Outperform, ask if the pantry is stocked – or if the ovens are about to fail. The real flavour hides in the cracks of the finances – and the accountability they keep off the menu.
Lee Thompson – Founder, The Cummins Accountability Project