CB Richard Ellis Group Inc. has agreed to modify $994 million of debt by offering lenders the ability to swap certain existing tranches of debt for new tranches with longer dated maturities and/or less amortization.
‘Extending maturities and deferring amortization on our existing credit facility is a key element of our strategy to proactively manage our balance sheet during this downturn," says Brett White, president and CEO, CB Richard Ellis. "The modifications, in combination with the other steps we have taken – amending our credit agreement to increase our flexibility, selling $600 million of securities to raise capital and lowering operating expenses while increasing market share – have greatly enhanced our financial position."
CB Richard Ellis ended the second quarter with more than $300 million of cash on its balance sheet and more than $500 million of capacity available on its revolving credit facility.
CB Richard Ellis' remaining total required debt amortization payments will be $4 million in 2009, $180 million in 2010 and $234 million in 2011. The company anticipates prepaying some of the required amortization before it is due.
The company has swapped $243 million of its $600 million revolving credit facility into new tranches of debt expiring in June 2013, two years beyond the current expiration date. Of this amount, approximately $201 million will be a new revolving facility and $42 million will convert to term debt. Depending on market conditions and other factors, the company expects that it will seek to extend, renew or replace additional portions of the remaining original revolving credit facility before its June 2011 expiration.
CB Richard Ellis has also extended approximately $257 million of outstanding term debt by 18 months to June 2013 and approximately $297 million of term debt by two years to December 2015. In addition, $197 million of term debt amortization was extended to December 2013.
The new tranches of debt include modestly higher interest rate spreads, which the company anticipates will average approximately 60 basis points on the net outstanding balance of the new debt. The actual incremental spread will depend on numerous factors, including the amount of any future prepayments of amortization.
"We believe this to be smart insurance against the potential for prolonged tight credit markets," adds Robert Sulentic, the company's group president and chief financial officer. "If the markets improve, there is no penalty for early repayment."
SOURCE: CB Richard Ellis Group Inc.