01—Abstract
Summary
Summary of the 8-K filed March 26, 2009. Cited figures are marked; the original filing is the authoritative source.
CBRE Group, Inc. (CBRE) filed an 8-K report on March 26, 2009, detailing significant amendments to its credit facilities.
The company entered into a Second Amended and Restated Credit Agreement and an Amended and Restated Guarantee and Pledge Agreement on March 24, 2009, with Credit Suisse as the administrative agent. These amendments are crucial for CBRE as they adjust financial covenants to provide greater flexibility during a challenging economic period.
Specifically, the permitted leverage ratio was increased, and the interest coverage ratio was decreased, offering the company more room to operate under tighter market conditions. The agreement also introduces provisions for adjusting covenant EBITDA calculations to include cost savings and potential restructuring efforts, which could be important for maintaining compliance as the company navigates the economic downturn.
02—Key points
Key Highlights
- CBRE Group, Inc. amended and restated its credit agreement and guarantee/pledge agreement on March 24, 2009.
- The permitted leverage ratio (Total Debt less Cash to Covenant EBITDA) was increased from 3.75:1.00 to 4.25:1.00 until March 31, 2011.
- The interest coverage ratio (Covenant EBITDA to Interest Expense) was decreased from 2.25:1.00 to 2.00:1.00 through March 31, 2011.
- The company gained the ability to adjust covenant EBITDA by adding back a portion of expenses incurred for cost savings and pro forma net run rate cost savings.
- A $100 million pre-payment on Tranche A and/or Tranche A-1 term loans was made at closing, with an additional voluntary $5.5 million pre-payment on Tranche B term loans.
- Restrictions were placed on restricted payments until December 31, 2009, after which they are limited if pro forma leverage exceeds 3.00:1.00.
- The agreement includes provisions for a receivables financing facility and allows for subordinated debt to be excluded from total debt calculations under certain conditions.
03—Questions
Frequently Asked Questions
Why did CBRE amend its credit agreement in March 2009?
CBRE amended its credit agreement to provide greater financial flexibility during a period of economic uncertainty. The changes adjusted key financial covenants, such as the leverage and interest coverage ratios, to better accommodate potential challenges and allow the company more room to operate.
What are the key changes to CBRE's debt covenants?
The most significant changes include an increase in the permitted leverage ratio from 3.75:1.00 to 4.25:1.00 until March 31, 2011, and a decrease in the interest coverage ratio from 2.25:1.00 to 2.00:1.00 during the same period. Additionally, the company can now adjust its covenant EBITDA calculation by adding back certain cost-saving expenses and pro forma savings.
Did CBRE make any debt prepayments as part of this amendment?
Yes, CBRE made a $100 million pre-payment on its Tranche A and/or Tranche A-1 term loans at closing and also voluntarily prepaid $5.5 million on its Tranche B term loan.
Are there any new restrictions on how CBRE can use its cash?
The amended agreement limits the company's ability to make restricted payments (like dividends or share buybacks) until December 31, 2009. After that date, such payments will be restricted if the pro forma leverage ratio would exceed 3.00:1.00, indicating a focus on debt reduction or maintaining deleveraging.
04—Continue