This excerpt taken from the MINI 10-K filed Mar 1, 2007.
(3) Line of Credit:
On February 17, 2006, we modified our revolving credit facility by increasing the facility by $100.0 million to $350.0 million and executed a Second Amended and Restated Loan and Security Agreement with our lenders. Borrowings of up to $350.0 million are available under this revolving facility, based on the value of our lease fleet, property, plant, equipment, and levels of inventories and receivables. We can increase borrowing availability under this revolving credit facility by an additional $75.0 million without the consent of our lenders, as long as we are in compliance with the terms of the agreement. Borrowings under the facility are, at our option, at either a spread from the prime or LIBOR rates, as defined. The credit facility is scheduled to expire in February 2011.
Our revolving credit facility has covenants that can restrict the conduct of our business if we go into default under the agreement or if we do not maintain borrowing availability in excess of certain pre-determined levels (generally between $35.0 million and $75.0 million). If our borrowing availability is below a specified level, the revolving credit facility triggers covenants restricting (or in some cases, further restricting) our ability to, among other things: (i) declare cash dividends, or redeem or repurchase our capital stock in excess of $10.0 million; (ii) prepay, redeem or purchase other debt; (iii) incur liens; (iv) make loans and investments; (v) incur additional indebtedness; (vi) amend or otherwise alter debt and other material agreements; (vii) make capital expenditures; (viii) engage in mergers, acquisitions and asset sales; (ix) transact with affiliates; and (x) alter the business we conduct. We also must comply with specified financial covenants and affirmative covenants. Should we fall below specified borrowing availability levels, then these financial covenants would set maximum permitted values for our leverage ratio (as defined), fixed charge coverage ratio and our minimum required utilization rates.
Borrowings under this revolving credit facility are secured by a lien on substantially all of our present and future assets. The lease fleet is appraised at least once annually by a third-party appraisal firm and up to 90% of the lesser of cost or appraised orderly liquidation value, as defined, may be included in the borrowing base to determine how much we may borrow under this facility. The interest rate spread from LIBOR and the prime rate can change
MOBILE MINI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
under the facility, based on a quarterly calculation of our ratio of funded debt to earnings before interest expense, taxes, depreciation and amortization and certain excluded expenses during the prior 12 months. At December 31, 2006, the prime rate was 8.25% and our weighted average LIBOR rate, including the effect of our interest rate swap agreements, was 6.4% on our outstanding balance of $203.7 million. We had approximately $142.5 million of availability at December 31, 2006, under our funded debt to EBITDA covenant.
Our revolving credit facility had outstanding balances of $157.9 million and $203.7 million at December 31, 2005 and 2006, respectively. During 2006, we used proceeds from a common stock offering, in part, to redeem 35% of the $150.0 million aggregate principal amount outstanding of our 9 1/2% Senior Notes at a redemption price of 109.5% of the principal balance redeemed plus accrued and unpaid interest thereon.
The weighted average interest rate under the line of credit, including the effect of applicable interest rate swap agreements, was approximately 5.7% in 2005 and 6.6% in 2006. The average balance outstanding during 2005 and 2006 was approximately $145.2 million and $180.8 million, respectively.
We have interest rate swap agreements under which we effectively fixed the interest rate payable on $50.0 million of borrowings under our credit facility so that the interest rate is based on a spread from a fixed rate rather than a spread from the LIBOR rate. We account for the swap agreements in accordance with SFAS No. 133 and the aggregate change in the fair value of the interest rate swap agreements resulted in a charge to comprehensive income for the year ended December 31, 2006 of $0.1 million, net of applicable income tax benefit of $0.1 million.