CB Richard Ellis has renegotiated the terms of its loan facilities to provide headroom against continued fall in revenues.
The series of measures to ease pressure on its debt pile was met with enthusiasm by shareholders – shares increased 60% to $4.80 following the announcement to the New York Stock Exchange.
The property service firm’s maximum leverage ratio has been increased so that its total debt can now rise from 3.75 times its earnings before taxes, depreciation and amortization (EBITDA), to 4.25 times.
Similarly, its minimum interest cover ratio has been lowered from 2.25 times EBITDA to two times.
The new terms allow it to adjust calculation of its EBITDA covenants so that it can add back up to $225m of savings.
The amended terms also enable CBRE to buy back loans at less than par, and can exclude subordinated debt from its total debt when calculating its covenants – on the condition that the proceeds are used to pay existing debt.
Interest on its debt has been set between 2.75 and 5 basis points over libor, which it described as ‘competitive’.
It said it expected the overall interest on its debt under the new agreement to be ‘in line with 2008 levels, although higher than it would have been without the amendment’.
In exchange for the new terms, the company will pay an amendment fee of 50 basis points to its lenders and make a $105m voluntary pre-payment of up to two quarters of amortization payments.
Brett White, president and chief executive officer of CB Richard Ellis, said: ‘We are pleased with this vote of confidence from our lenders and thank them for their support. Despite the formidable challenges in the economy, we have continued to comply with all of the covenants in our credit agreement. The amendment will significantly increase our financial flexibility.'