Business Context and Reporting Period
Company: Herbalife Ltd.
Filing Type: Form 8-K (Current Report)
Date of Report: July 21, 2006
Event: Entry into a new senior secured credit facility and redemption of outstanding notes.
Key Financial Metrics and Debt Structure
This filing details a refinancing transaction rather than operational performance metrics. Revenue, profit, and cash flow figures are not provided in this document.
- New Credit Facility: $300.0 million total senior secured credit facility.
- Facility Composition: $200.0 million delayed-draw term loan and $100.0 million revolving credit facility.
- Expansion Option: Ability to increase the facility by up to an additional $200.0 million under certain circumstances.
- Interest Rates: Eurodollar rate plus 1.50% (Term Loan) or Base rate plus 0.50%. Revolver rates range from 1.25% to 1.50% over Eurodollar depending on credit ratings.
- Maturity: Term loan matures in seven years; Revolver matures in six years.
- Collateral: Secured by substantially all assets of Herbalife International and Guarantors.
Material Changes Versus Prior Period
The company replaced its existing $225.0 million senior secured credit facility (entered into December 2004) with the new $300.0 million facility.
- Repayment of Prior Debt: Herbalife International used $65.0 million in available cash and $15.0 million in borrowings under the new revolver to repay all amounts outstanding under the prior facility.
- Redemption of Notes: The company elected to redeem $165.0 million aggregate principal amount of its 9 1/2% Notes due 2011.
- Redemption Price: Approximately 109.8% of the principal amount plus accrued interest.
- Redemption Date: Scheduled for August 23, 2006.
Outlook, Risks, and Covenants
The new credit facility includes standard affirmative, negative, and financial covenants. Key restrictions include limitations on:
- Declaring and paying dividends and other distributions.
- Redeeming or repurchasing certain other indebtedness.
- Incurring additional indebtedness, liens, or engaging in mergers and asset sales.
- Transactions with affiliates.
Use of Proceeds: Borrowings under the new term loan will be used to redeem the 9 1/2% Notes and pay accrued interest.
Investor Verification Checklist
- Verify the exact redemption price calculation (109.8% of principal) and total cash outflow required for the August 23, 2006, note redemption.
- Confirm the company's current credit ratings with Moody's and Standard & Poor's to determine the applicable interest rate margin on the revolver.
- Review the impact of the new financial covenants on the company's ability to pay dividends or repurchase shares.
- Assess the company's liquidity position following the use of $65.0 million in cash to retire the prior credit facility.