Amkor Technology has amended its credit agreement, replacing the existing financial covenants with covenants based on minimum liquidity, maximum capital expenditures and minimum levels of EBITDA. "In May of 2000, the industry was booming, and the covenants reflected a more robust forecast," said Ken Joyce, cfo. Based in Chandler, Ariz., the company offers semiconductor companies and electronics original equipment manufacturers design and manufacturing services.
The amended covenants were granted in exchange for the company paying down a significant portion of its debt. The term loan "B" was reduced to $98 million from $223 million and the revolving credit facility was reduced to $100 million from $200 million. The original deal was $900 million, and the company paid down approximately $400 million last February. With additional paydowns financed through bond deals over the year, the company's credit facility had $223 million remaining. Since so much of the debt had been paid off, the banks granted temporary covenant amendments and delayed the original covenant terms until January of 2003. "We will not be in compliance with our covenants in the next two quarters, so we asked that the covenants be waived through December 2002," explained Joyce. Those amended covenants are based on liquidity, rather than being earnings-based.
The new covenants allow maximum capital expenditure, which limits spending; a minimum liquidity ratio, which maintain basic level of liquidity to assure repayment; and a minimum level of EBITDA. "It gives the banks some predictive metrics they can look at so can make sure they're going to repaid," Joyce said. "It shifted the focus from metrics based on a robust economy to metrics based on the downturn we're in now. Citibank and Deutsche Bank are the lead arrangers. There are 15 banks in the syndicate. Pricing did go up a point to LIBOR plus 4%. "In this environment, it's not bad," Joyce said. "The banks wanted a LIBOR floor and we said no. There's give and take."