8-KLeadership ChangesMaterial AgreementsFinancial Events

BROWN & BROWN, INC. 8-K Report, Material Agreement (Dec 21, 2018)

Filed December 21, 2018For Securities:BRO

Summary

Brown & Brown, Inc. (BRO) announced on December 21, 2018, the execution of a Term Loan Credit Agreement, securing an initial $300 million unsecured term loan. This loan, which can be expanded up to $450 million at the lenders' discretion, carries an interest rate of 1.25% above the adjusted 1-Month LIBOR, based on the company's leverage or debt ratings. The borrowed funds were immediately used to pay down outstanding debt under the company's existing Revolving Credit Facility, which had approximately $600 million borrowed in connection with the recent Hays Companies acquisition. In addition to the financing update, the company also announced a change to its Board of Directors. Effective December 18, 2018, the Board size was increased to fourteen directors with the appointment of Lawrence L. Gellerstedt III. Mr. Gellerstedt brings extensive executive experience, notably as Chairman and CEO of Cousins Properties Incorporated, and his directorship will expire at the 2019 Annual Meeting of Shareholders. He is expected to be appointed to board committees following this meeting.

Key Highlights

  • 1Brown & Brown, Inc. secured a new $300 million unsecured term loan facility.
  • 2The term loan has a potential to increase to $450 million, subject to lender approval.
  • 3Proceeds from the new term loan were used to reduce outstanding debt under the company's Revolving Credit Facility.
  • 4The previous borrowing on the Revolving Credit Facility of $600 million was to finance the acquisition of Hays Companies.
  • 5The interest rate on the term loan is variable, tied to 1-Month LIBOR plus a 1.25% spread, influenced by leverage ratios.
  • 6The company expanded its Board of Directors by one, appointing Lawrence L. Gellerstedt III.
  • 7Mr. Gellerstedt has significant executive experience, including as Chairman and CEO of Cousins Properties Incorporated.

Frequently Asked Questions

The $300 million term loan was obtained to reduce outstanding indebtedness under Brown & Brown's existing Revolving Credit Facility. This action was taken shortly after utilizing $600 million from the Revolving Credit Facility to fund the acquisition of certain assets and liabilities of Hays Companies.

The term loan is unsecured, initially for $300 million but with the possibility of increasing to $450 million at the lenders' discretion. It has a five-year term, and the interest rate is 1.25% above the adjusted 1-Month LIBOR, which is determined by the company's net debt leverage ratio or its long-term debt rating from Moody's and Standard & Poor's.

Lawrence L. Gellerstedt III, age 62, has been appointed to Brown & Brown's Board of Directors. He has extensive executive experience, most recently serving as Chairman of the Board and CEO of Cousins Properties Incorporated. His appointment expands the Board to fourteen members, and he is expected to join board committees after the 2019 Annual Meeting of Shareholders.

This filing indicates a shift in debt. The company has taken on a new $300 million term loan and used it to pay down debt under its revolving credit facility. This suggests a move towards longer-term, fixed-rate (relative to the term of the loan) financing compared to the potentially more flexible but shorter-term nature of a revolving credit facility. The specific impact on overall leverage and interest expense will depend on the terms of the revolving credit facility that was paid down.