Business Context and Reporting Period
This Form 8-K was filed by Access Integrated Technologies, Inc. (the "Company") on April 8, 2008, reporting events occurring on April 2, 2008. The filing details a material definitive agreement entered into by the Company's subsidiary, Christie/AIX, Inc., to manage interest rate exposure.
Key Financial Metrics and Obligations
- Instrument: Interest rate swap agreement with HSBC Bank USA, National Association.
- Effective Period: August 1, 2008, to August 1, 2010.
- Notional Coverage: 90% of the outstanding amount under the Company's senior credit facility with General Electric Capital Corporation.
- Fixed Rate: The swap effectively fixes the annual interest rate on the covered debt at 7.3%.
- Payment Structure: The Company pays a fixed rate and receives floating payments based on LIBOR plus an applicable margin.
Material Changes and Agreements
The Company entered into a 2002 ISDA Master Agreement, supplemented by a Schedule and Confirmation, to hedge floating rate interest risk. This agreement creates a direct financial obligation and an off-balance sheet arrangement. The swap may be terminated prior to expiration, including upon the prepayment of the underlying Credit Facility.
Outlook, Risks, and Management Commentary
The primary objective of this transaction is to mitigate the risk of rising interest rates on the Company's variable-rate debt. The filing notes that the swap is arranged by GE Corporate Financial Services. No specific guidance regarding future revenue or earnings was provided in this report, as the filing focuses solely on the debt hedging arrangement.
Key Facts for Investor Verification
- Verify the total outstanding principal amount of the senior credit facility with General Electric Capital Corporation to calculate the absolute dollar value of the 90% hedged portion.
- Confirm the current LIBOR rate and the applicable margin to understand the floating rate component being exchanged.
- Review the full text of the Credit Facility to understand prepayment terms that could trigger early termination of the swap.
- Assess the impact of the fixed 7.3% rate on future interest expense compared to prevailing market rates.