Business Context and Reporting Period
This Form 8-K Current Report was filed by Wyndham Worldwide Corporation on November 21, 2017. The filing discloses the entry into a new material definitive agreement regarding corporate financing.
Key Financial Metrics and Debt Structure
The filing details the establishment of a new $400 million revolving credit facility. Key terms include:
- Facility Size: $400 million (expandable upon request and lender agreement).
- Maturity Date: November 20, 2018.
- Interest Rates: Based on Eurodollar (LIBOR) or Alternate Base Rate plus an applicable margin ranging from 0.925% to 1.525% for LIBOR loans.
- Facility Fee: 0.075% to 0.225% on the total facility amount, dependent on credit rating.
- Existing Debt: The new facility is in addition to an existing $1.5 billion credit facility and a $325 million term loan.
Material Changes and Covenants
The primary material change is the addition of the new $400 million credit line. The agreement imposes specific financial covenants:
- Minimum Interest Coverage Ratio: Consolidated EBITDA/Consolidated Interest Expense must be at least 2.5x.
- Maximum Leverage Ratio: Consolidated Total Indebtedness/Consolidated EBITDA must be 4.25x or less (temporarily adjustable to 5.0x for material acquisitions).
- Negative Covenants: Restrictions on incurring additional liens or indebtedness, selling assets, and merging with other entities.
Outlook, Risks, and Contingencies
The filing outlines several events of default that could trigger immediate repayment of outstanding borrowings and termination of borrowing rights:
- Failure to pay principal or interest.
- Material inaccuracies in representations or warranties.
- Failure to perform covenants not remedied within 30 days of notice.
- Cross-defaults with other debt obligations.
- Bankruptcy or change in control.
The filing notes that some lenders have existing relationships with the company involving cash management, investment banking, and derivative arrangements.
Investor Verification Checklist
- Verify the company's current credit rating to determine the specific applicable margin and facility fee.
- Confirm current Consolidated EBITDA and Interest Expense to ensure compliance with the 2.5x Interest Coverage Ratio.
- Assess total indebtedness against EBITDA to ensure the 4.25x Leverage Ratio covenant is met.
- Review the terms of the existing $1.5 billion facility and $325 million term loan to understand total liquidity exposure.
- Monitor for any material acquisitions that might trigger the temporary leverage ratio increase to 5.0x.