8-KMaterial AgreementsFinancial EventsExhibits & Filings

ARCH CAPITAL GROUP LTD. 8-K Report, Material Agreement (Aug 22, 2011)

Filed August 22, 2011For Securities:ACGLACGLNACGLO

Summary

Arch Capital Group Ltd. (ACGL) announced on August 18, 2011, the execution of a new Credit Agreement, effectively replacing a prior agreement from 2006. This new facility provides significant borrowing capacity for the company and its subsidiaries, totaling up to $500 million for secured letters of credit issued to designated subsidiary borrowers. Additionally, ACGL has access to unsecured revolving loans and letters of credit up to $300 million, with specific provisions for its subsidiaries Arch Reinsurance Ltd. and Arch Reinsurance Company to receive up to $100 million each in unsecured letters of credit. The Credit Agreement includes variable interest rates based on LIBOR or an alternative base rate, along with standard covenants that restrict asset disposals, mergers, dividend payments, and incurrence of additional debt or liens, subject to certain thresholds and exceptions. Affirmative covenants require ACGL to maintain specific financial strength ratings, while financial covenants focus on tangible net worth and maximum leverage. The agreement also outlines events of default that could lead to acceleration of obligations, such as payment or covenant defaults, material inaccuracies, bankruptcy, change of control, and cross-defaults.

Key Highlights

  • 1New Credit Agreement entered into on August 18, 2011, replacing a prior agreement from 2006.
  • 2Total facility capacity of up to $500 million for secured letters of credit to designated subsidiaries.
  • 3ACGL can access unsecured revolving loans and letters of credit up to an aggregate of $300 million.
  • 4Arch Reinsurance Ltd. and Arch Reinsurance Company can each utilize up to $100 million in unsecured letters of credit.
  • 5Revolving loans will bear variable interest rates based on LIBOR or an alternative base rate.
  • 6Customary covenants include restrictions on asset disposals, mergers, dividends, liens, and indebtedness, subject to thresholds and exceptions.
  • 7Affirmative covenants require maintaining certain financial strength ratings.
  • 8Financial covenants include maintaining specified tangible net worth and maximum leverage ratios.

Frequently Asked Questions

The Credit Agreement allows for up to $500 million in secured letters of credit for designated subsidiary borrowers. Additionally, Arch Capital Group Ltd. (ACGL) has access to unsecured revolving loans and letters of credit totaling up to $300 million, with specific allocations for certain subsidiaries.

Revolving loans will be made at a variable rate, determined by either the LIBOR rate or an alternative base rate, at ACGL's choice.

The Credit Agreement contains customary covenants that limit ACGL's ability to dispose of material assets, consolidate or merge, pay dividends, or incur liens or indebtedness under certain circumstances. These restrictions typically have minimum thresholds and exceptions. It also includes affirmative covenants requiring the maintenance of certain financial strength ratings and financial covenants related to tangible net worth and leverage.

The Credit Agreement provides for the acceleration of the Borrowers' obligations upon the occurrence and continuation of certain events of default. These events can include payment defaults, covenant defaults, material inaccuracies in representations, bankruptcy proceedings, change of control events, cross-defaults with other agreements, loss of insurance licenses, ERISA events, and significant judgments.