U.S.I. Obtains Covenant Wiggle Room

  • 28 Sep 2003
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U.S.I. Holdings Corp. has wrapped up a $125 million term loan and $30 million revolver that will give the company more room under its financial covenants. "It basically resets all of our covenants with levels that we feel we will be comfortable with," said Bob Schneider, executive v.p. and cfo. The company's former facility was set up in 1999 as a bridge loan to permanent financing, such as a high-yield deal, that never came to fruition, he added.

The former credit therefore contained incentives for U.S.I. to pay down the credit. For example, "There was a minimum net worth covenant that [would have been] triggered in the first quarter of 2004 that we would have failed," Schneider explained. The term loan under the former facility was also set to begin amortization in the fourth quarter. Additionally, if the company had not taken out the former facility by Oct. 1, U.S.I. would have been required to pay 1% across the outstanding amount on the revolver and the term loan.

The former credit originally comprised a $75 million revolver and a $125 million term loan, but $90 million of the proceeds from an initial public offering last year were used to pay down the term loan. Both pieces were priced at LIBOR plus 41/2%. The new term loan is priced at LIBOR plus 3% and the revolver is priced on a grid tied to ratings. It is currently undrawn, but if the company were to draw on the loan, the drawn portion would be priced at LIBOR plus 31/2%.

The new loan is led by J.P. Morgan and Bank of America. "Both J.P. Morgan and Bank of America were really aggressive in giving us information and showing us that they were the market leaders," said Schneider, explaining why the duo was chosen. Credit Lyonnais and J.P. Morgan led the former facility. Schneider said Credit Lyonnais was invited to participate on the new facility but declined.

  • 28 Sep 2003

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