Hillenbrand Industries, which caters to the funeral and health care service industries, needs more covenant leeway for its credit facility after a jury ruled against the company and its Hil-Rom business unit in a lawsuit filed by Kinetic Concepts. Hillenbrand has appealed the $173.6 million decision-- which finds the health care unit culpable of violating various antitrust laws-- but also amended its $500 million credit in the event that the litigation results in a payout. "We amended the facility in case of a material decree," said Mark Lanning, v.p. and treasurer. The amended line provides an alleviated debt-to-capital ratio requirement if Hillenbrand loses the lawsuit, he explained. The court is expected to issue a ruling sometime after this Wednesday.
The current facility was implemented in August and consists of a 364-day, $250 million revolver and a three-year revolver for the same amount, Lanning said. Both revolvers are tied to a ratings- and debt-based grid, with the current all-in drawn rate at 30 basis points over LIBOR. Banc of America Securities and Salomon Smith Barney lead the lines with a syndicate of 10 other lenders, Lanning noted, adding that there was full approval by the lending group for the amendments. The facilities were initially put in place for acquisitions, working capital, capital expenditure requirements and general corporate purposes. However, the additional flexibility in the credit agreement allows Hillenbrand to fully tap the revolvers if the litigation appeal goes against Hillenbrand, forcing it to use the capacity toward case expenses. Calls to a Kinetic official were not returned by press time.