8-KMaterial AgreementsFinancial EventsExhibits & Filings

ARCH CAPITAL GROUP LTD. 8-K Report, Material Agreement (Jan 23, 2006)

Filed January 23, 2006For Securities:ACGLACGLNACGLO

Summary

Arch Capital Group Ltd. (ACGL), through its subsidiary Arch Reinsurance Ltd. (ARL), has amended and restated its Letter of Credit and Reimbursement Agreement with Barclays Bank PLC. This amendment, effective as of December 31, 2005, increases the maximum face amount of letters of credit available for issuance from $175 million to $200 million. This facility is crucial for ACGL's reinsurance operations, providing flexibility and financial backing. The agreement allows for letters of credit in various currencies (USD, GBP, EUR) with different expiration terms, up to four years for some and 364 days for others. The agreement also includes customary covenants related to asset disposals, liens, indebtedness, and maintaining specific financial strength ratings, along with events of default that could trigger acceleration of obligations.

Key Highlights

  • 1Increase in Letter of Credit Facility: The maximum face amount of letters of credit available has been raised from $175 million to $200 million.
  • 2Extended Issuance Period: The agreement allows for the issuance of letters of credit through December 31, 2006, with specific terms for different types of letters.
  • 3Multi-Currency Facility: Letters of credit can be issued in U.S. Dollars, Pounds Sterling, or Euros.
  • 4Secured Facility: The letter of credit facility is secured, and fees are payable to Barclays based on outstanding commitments.
  • 5Customary Covenants: The agreement includes standard covenants limiting asset disposals, incurrence of liens, and indebtedness, subject to thresholds and exceptions.
  • 6Financial Strength Requirements: Arch Reinsurance Ltd. is required to maintain certain financial strength ratings.
  • 7Events of Default Specified: The agreement outlines events that could lead to the acceleration of ARL's obligations, including financial and covenant defaults, as well as bankruptcy.

Frequently Asked Questions

The primary purpose is to increase the financial flexibility and capacity for Arch Reinsurance Ltd. by raising the maximum amount of letters of credit available from $175 million to $200 million. This facility supports its reinsurance operations.

The parties involved are Arch Reinsurance Ltd. (ARL), a subsidiary of Arch Capital Group Ltd. (ACGL), as the obligor, and Barclays Bank PLC, acting as both the agent and issuer.

ARL must pay fees to Barclays based on outstanding commitments. The agreement also contains covenants that restrict ACGL's ability to dispose of material assets, incur liens, or take on certain indebtedness. Furthermore, ARL is obligated to maintain specified financial strength ratings and adhere to minimum net worth and maximum leverage ratios.

Obligations can be accelerated upon the occurrence of certain events of default, which include payment defaults, covenant defaults, failure to maintain minimum net worth or maximum leverage ratios, material inaccuracies in representations, bankruptcy proceedings, cross-defaults on other agreements, and other customary defaults.