What is the primary purpose of this new $500 million letter of credit facility?

The primary purpose is to increase ACE Limited's available credit capacity, providing greater flexibility in managing collateral, especially during potentially volatile financial market conditions and periods of increased catastrophe severity. The funds can be used for general corporate purposes and to support the obligations of its wholly-owned subsidiaries.

What are the key financial covenants ACE Limited must adhere to under this agreement?

ACE Limited must maintain a minimum consolidated net worth (with an annual reset provision and adjustments for net income and equity issuances) and a total debt to total capitalization ratio not exceeding 0.35 to 1. These covenants are designed to ensure the company's financial stability.

Does this new facility replace any existing credit lines?

No, this new letter of credit facility supplements ACE's existing letter of credit and revolving credit facilities. It serves to increase the company's aggregate available credit capacity.

What are the costs associated with this letter of credit facility?

ACE Limited pays an annual facility fee on the total amount available under the LOC Agreement, regardless of usage. It also paid a customary structuring fee upfront and will incur customary administrative charges related to any letters of credit issued. An unwind fee may apply if ACE terminates any portion of the availability before the maturity date.

CB 8-K: Material Agreements & Financial Events

Summary

This 8-K filing by ACE Limited (now Chubb Ltd) on June 17, 2009, details the entry into a new five-year, $500 million unsecured letter of credit (LOC) facility with Deutsche Bank AG, New York Branch. This facility is intended to bolster ACE's liquidity and provide flexibility in managing collateral during periods of financial market volatility and potentially increased catastrophe severity. The LOCs can be used for general corporate purposes and to support obligations of ACE's wholly-owned subsidiaries, supplementing existing credit lines.

Key Highlights

1ACE Limited secured a new five-year, $500 million unsecured letter of credit facility.
2The facility is designed to enhance ACE's liquidity and provide flexibility in collateral management.
3The LOCs can be utilized for general corporate purposes and to support wholly-owned subsidiaries.
4This new facility complements ACE's existing credit arrangements, increasing overall capacity.
5Key financial covenants include maintaining a minimum consolidated net worth and a debt-to-capitalization ratio.
6The agreement includes customary events of default and provisions for facility, unwind, and administrative fees.

Chubb Ltd 8-K Report, Material Agreement (Jun 18, 2009)

Summary

Key Highlights

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