Insurance intermediary Hilb Rogal & Hobbs found the bank market much more welcoming after New York Attorney General Elliot Spitzer's regulatory crackdown of the sector finally settled down. Carolyn Jones, treasurer, said when the company did its previous credit facility in 2004, Spitzer's investigations of broker compensation had created instability in the brokerage industry, making lending more expensive for brokers. "At the end of 2004, there was a lot of uncertainty related to regulations. But time has passed since then. Conditions have improved," said Jones.
Bank of America is the sole lead arranger of the credit facility, which consists of a $325 million revolver and a $100 million term loan, both priced at LIBOR plus 1 1/2%. The credit replaces a $175 million revolver and $50 million term loan "A" priced at LIBOR plus 1 3/4%, and a $200 million term loan "B," priced at LIBOR plus 2 1/4%.
The company increased the revolving part of the credit line because it likes the flexibility of being able to pay down the facility while retaining borrowing capacity, said Jones. The credit line also contains an option to increase the size of either the revolving credit facility or the term loan by up to $125 million. Jones said this feature allows the company to borrow extra money if it needs it without having to return to the bank market.
The company will use the financing to pay the outstanding $240 million under its prior credit facility and to fund future acquisitions. Jones said the company sees many acquisition opportunities as the insurance brokerage market consolidates. She would not comment on any specific targets. The credit facility also includes relaxed covenants that provide more flexibility to make acquisitions, pay dividends and buy back shares.
Other agents on the deal are SunTrust Bank, ING Capital, PNC Bank, National Association and Trust Company of Virginia. Jones said B of A has a long-standing relationship with the company and approached it to do the refinancing.