Summary
Arch Capital Group Ltd. (ACGL) announced via an 8-K filing on November 19, 2010, that its subsidiary, Arch Reinsurance Ltd. (ARL), entered into a secured Letter of Credit and Reimbursement Agreement. This agreement, effective November 18, 2010, allows ARL to obtain letters of credit totaling up to £50,000,000. The facility enables ARL to request letters of credit in U.S. Dollars or Pounds Sterling with maturities of up to four years, with the ability to issue or renew these until December 31, 2010. The agreement includes standard covenants and conditions, such as restrictions on asset disposals and incurring liens or debt, subject to certain thresholds. Importantly, it also requires ARL to maintain specific financial strength ratings and outlines events of default that could lead to acceleration of ARL's obligations. These events include payment or covenant defaults, breaches of financial covenants by ACGL (net worth and leverage ratios), and bankruptcy. The lenders in this new agreement are also parties to ACGL's existing credit facilities.
Key Highlights
- 1Arch Capital Group's subsidiary, Arch Reinsurance Ltd. (ARL), secured a new Letter of Credit and Reimbursement Agreement.
- 2The agreement provides for up to £50,000,000 in letters of credit.
- 3Letters of credit can be issued in U.S. Dollars or Pounds Sterling.
- 4The facility allows for letters of credit with an expiration date of up to four years.
- 5The ability to request new or renewed letters of credit is available until December 31, 2010.
- 6The agreement is secured and includes standard covenants, financial strength rating maintenance, and events of default.
- 7Key lenders are also participants in ACGL's existing credit agreements.