This excerpt taken from the CHH 8-K filed Jun 21, 2006.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
On June 16, 2006, the Company entered the New Credit Facility. The lenders for the New Credit Facility include 10 financial institutions. The New Credit Facility allows the Company to borrow, repay and reborrow revolving loans up to $350 million (which includes swingline loans for up to $20 million and standby letters of credit up to $30 million) until the scheduled maturity date of June 16, 2011. The Company has the ability to request an increase in available borrowings under the New Credit Facility by an additional amount of up to $150 million by obtaining the agreement of the existing lenders to increase their lending commitments or by adding additional lenders. The Companys obligations under the New Credit Facility are fully guaranteed by certain of the Companys significant subsidiaries.
The rate of interest generally applicable for revolving loans under the New Credit Facility are, at the Companys option, equal to either (i) the greater of the prime rate or the federal funds effective rate plus 0.50%, or (ii) an adjusted LIBOR rate plus a margin between 0.220% and 0.700% based on the Companys credit rating.
The New Credit Facility requires the Company to pay a quarterly facility fee, based upon the credit rating of the Company, at a rate between 0.080% and 0.175%, on the full amount of the commitment (regardless of usage). The New Credit Facility also requires the payment of a quarterly usage fee, based upon the credit rating of the Company, at a rate between 0.100% and 0.125%, on the amount outstanding under the commitment, at all times when the amount borrowed under the New Credit Facility exceeds 50% of the total commitment.
The New Credit Facility includes customary covenants that restrict the Companys, and certain of its significant subsidiaries, ability to make certain investments, incur certain debt, and dispose of assets, among other restrictions. The Companys financial covenants restrict the Company from maintaining a consolidated maximum leverage ratio greater than 3.25 to 1.00, and from maintaining a consolidated minimum interest coverage ratio less than 3.75 to 1.00.
Upon the occurrence of an event of default, which includes the failure of the Company or certain of its subsidiaries to comply with the negative and affirmative covenants contained in the New Credit Facility (beyond any applicable grace or cure periods), the obligation of the lenders under the New Credit Facility to extend credit may terminate, and outstanding borrowing may be accelerated. For certain events of default related to insolvency and receivership, the commitments of the lenders will be automatically terminated and all outstanding obligations of the Company will become immediately due and payable.
The brief summary of the material provisions of the New Credit Facility set forth above is qualified in its entirety by reference to the full text of the credit agreement.
Certain of the lenders and other parties under the New Credit Facility were lenders, agents and parties under the Old Credit Facility, and they and their respective affiliates have performed, and may in the future perform, various commercial banking, investment banking and other financial advisory services for the Company and its subsidiaries for which they have received, and will receive, customary fees and expenses.