01—Abstract
Summary
Summary of the 8-K filed August 12, 2009. Cited figures are marked; the original filing is the authoritative source.
This 8-K filing by CBRE GROUP, INC. (formerly CB Richard Ellis Group, Inc.) on August 12, 2009, details an amendment to their existing Second Amended and Restated Credit Agreement, dated March 24, 2009.
The primary focus of Amendment No. 1, effective August 6, 2009, is to introduce a mandatory prepayment requirement related to future debt issuances. Specifically, if CBRE issues new senior unsecured debt and its Leverage Ratio would exceed 2.0 to 1.0, the company must use 100%a of the net proceeds from that issuance to prepay outstanding Term Loans, unless waived by the Term Lenders. This amendment also adjusts how the Leverage Ratio is calculated for the purpose of this mandatory prepayment.
It allows for certain restructuring expenses and cost savings attributable to restructuring initiatives to be disregarded, and it permits pro forma adjustments for future cost savings related to acquisitions. These changes appear designed to provide greater flexibility within defined financial covenants while also ensuring that new debt issuances, under specific conditions, contribute to deleveraging.
02—Key points
Key Highlights
- Amendment No. 1 to the Second Amended and Restated Credit Agreement was entered into on August 6, 2009.
- The amendment introduces a mandatory prepayment event triggered by future senior unsecured debt issuances.
- If the company's Leverage Ratio exceeds 2.0 to 1.0 upon issuing new senior unsecured debt, 100% of the net proceeds must be used to prepay Term Loans.
- The mandatory prepayment requirement can be waived by a majority of the Term Lenders.
- Adjustments were made to the definition of Leverage Ratio for mandatory prepayment calculations, allowing disregard of certain restructuring expense limits and incorporating pro forma cost savings from acquisitions.
- The amendment aims to manage leverage and provides a mechanism for deleveraging in conjunction with new debt issuance under certain conditions.
- Credit Suisse acts as the administrative agent and collateral agent for the credit agreement.
03—Questions
Frequently Asked Questions
What is the main purpose of Amendment No. 1 to the Credit Agreement?
The primary purpose of Amendment No. 1 is to introduce a mandatory prepayment provision for outstanding Term Loans. This provision is triggered if CBRE issues new senior unsecured debt and its Leverage Ratio would exceed 2.0 to 1.0. In such a scenario, the company must use the net proceeds from the new debt issuance to prepay the Term Loans.
How does the amendment affect the calculation of the Leverage Ratio?
For the specific purpose of calculating the mandatory prepayment based on the Leverage Ratio, the amendment allows for certain modifications. It permits the disregard of time and dollar limits on restructuring expenses and cost savings in the definition of Consolidated EBITDA. Additionally, it enables the inclusion of pro forma cost savings from acquisitions for the next four fiscal quarters.
Does this amendment mean CBRE is taking on more debt?
This filing itself does not indicate that CBRE is currently taking on more debt. Instead, it modifies the terms of their existing credit agreement to address potential future debt issuances. The amendment imposes a condition that could require the company to use the proceeds of any future senior unsecured debt issuance to reduce its existing term loan obligations if its leverage exceeds a specified threshold.
Who are the key parties involved in this credit agreement amendment?
The key parties involved are CBRE GROUP, INC. (the registrant), CB Richard Ellis Services, Inc. (a subsidiary), certain subsidiaries of Services, the lenders party to the agreement, and Credit Suisse, acting as both the administrative agent and collateral agent.
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