Business Context and Reporting Period
This Form 8-K Current Report was filed by Marriott Vacations Worldwide Corporation on August 16, 2017. The filing details the entry into a new material definitive agreement regarding a revolving corporate credit facility and the termination of a prior credit agreement.
Key Financial Metrics and Agreements
New Revolving Corporate Credit Facility
- Total Capacity: $250 million.
- Letter of Credit Sub-facility: $30 million.
- Administrative Agent: JPMorgan Chase Bank, N.A.
- Interest Rate: Floating rate plus a margin ranging from 0.50% to 2.75%, dependent on loan type and credit rating.
- Commitment Fee: 20 to 40 basis points per annum on unused availability, dependent on credit rating.
- Collateral: Secured by a perfected first priority security interest in substantially all assets of the Company and guarantors.
Financial Covenants
- Maximum Secured Net Debt to Adjusted EBITDA: 2.00 to 1.00.
- Minimum Adjusted EBITDA to Interest Expense: 3.00 to 1.00.
Warehouse Credit Facility Amendment
- Facility Size: $250 million (existing facility amended).
- Purpose: Securitization of vacation ownership notes receivable on a non-recourse basis.
- Change: Omnibus Amendment No. 6 aligns financial covenant compliance with the new Credit Agreement rather than the prior agreement.
Material Changes Versus Prior Period
The Company terminated its Second Amended and Restated Credit Agreement (dated September 10, 2014), which provided a $200 million revolving facility. All outstanding amounts under the prior facility were repaid in full, and all commitments, security interests, and guarantees associated with the prior agreement were terminated or released on August 16, 2017.
Guidance, Outlook, and Risks
The new Credit Agreement is intended to provide support for the Company's business, including ongoing liquidity and letters of credit. The filing notes that financial institutions involved in the new and prior agreements may perform various commercial and investment banking services for the Company. The filing text does not provide specific forward-looking revenue guidance or management commentary beyond the description of the financing terms.
Important Facts for Investor Verification
- Verify the Company's current credit rating to determine the specific interest rate margin and commitment fee applicable under the new facility.
- Confirm the Company's compliance with the new financial covenants (Debt/EBITDA and Interest Coverage ratios) in subsequent quarterly reports.
- Review the full text of the Credit Agreement (Exhibit 10.1) and Guarantee and Collateral Agreement (Exhibit 10.2) for specific definitions of "consolidated secured net debt" and "consolidated adjusted EBITDA."
- Monitor the utilization of the $30 million letter of credit sub-facility.