Meadowbrook secures loan waivers; pricing raised to Libor plus 250 bps

By Susanna Moon

Chicago, Sept. 20 - Meadowbrook Insurance Group, Inc. secured waivers to the events of default under its credit agreement and the company is in compliance with the financial covenants, according to an 8-K filing with the Securities and Exchange Commission.

In return, interest on the loans as of Thursday was raised to Libor plus 250 basis points, with a spread of Libor plus 175 bps to 250 bps based on leverage. The unused fee is initially 37.5 bps and ranges from 25 bps to 37.5 bps.

The amended terms also lower the commitments for the revolving credit facility to $30 million from $100 million, with periodic cuts after that to $21 million on March 31, 2016.

In addition, the maximum permitted amount of permitted dividends per fiscal quarter will be the lesser of $0.02 per common share or $1.25 million in the aggregate.

There will also be restrictions on share repurchases, changes in the requirements for Meadowbrook to prepay the loans following asset sales and removal of the accordion feature or incremental facility, which had allowed Meadowbrook to increase its line of credit.

The company amended its credit agreement Thursday with J.P. Morgan Securities, LLC as the bookrunner and lead arranger, JPMorgan Chase Bank, NA as administrative agent and Bank of America, NA and KeyBank, NA as syndication agents.

The financial covenants require that the minimum consolidated net worth is $365,697,000 as of Thursday, with quarterly increases after that of the sum of (a) 75% of positive net income and (b) 75% of increases in shareholders' equity by reason of the issuance and sale of equity interests.

The minimum risk-based capital ratio for all material insurance company subsidiaries is 1.75 times; the maximum permitted consolidated leverage ratio of is 0.375 times prior to Sept. 30, 2014 and 0.35 times beginning Sept. 30, 2014; the minimum consolidated fixed charge coverage ratio is 1.25 times; and the minimum A.M. Best rating is B++.

Meadowbrook, based in Southfield, Mich., is a risk-management organization that specializes in specialty risk management solutions for agents, professional and trade associations and small to medium-sized insureds.

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