Summary
Ares Management, L.P. (ARES) filed an 8-K on July 28, 2015, reporting an amendment to its Sixth Amended and Restated Credit Agreement, effective July 23, 2015. This amendment, specifically Amendment No. 3, primarily adjusted the company's leverage ratio and modified how 'Debt' is calculated for financial covenant compliance. The key changes for investors involve an increase in the maximum allowed leverage ratio. It was raised from 3.00:1.00 to 3.75:1.00 for fiscal quarters ending on or before December 31, 2016, and then to 3.50:1.00 thereafter. Additionally, the company gained flexibility by allowing 'Debt' to be calculated net of cash, with certain limitations to prevent its misuse for simply holding debt without immediate application to acquisitions or related transactions. These changes indicate a potential for increased borrowing capacity to support the company's growth initiatives.
Key Highlights
- 1Amendment No. 3 to the Sixth Amended and Restated Credit Agreement was executed on July 23, 2015.
- 2The maximum leverage ratio for the borrower was increased from 3.00:1.00 to 3.75:1.00 for quarters ending on or before December 31, 2016.
- 3Following December 31, 2016, the maximum leverage ratio will be further adjusted to 3.50:1.00.
- 4The definition of 'Debt' for financial covenant calculations now allows for netting of cash balances.
- 5A specific cap of $750 million is placed on the amount of cash that can be netted, provided it's used for specific acquisitions or related transactions within seven days.
- 6This amendment provides Ares Management with greater financial flexibility and potential for increased debt financing.
- 7The filing incorporates the Amendment as Exhibit 10.1.