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Item 1.01.
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Entry into a Material Definitive Agreement.
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On July 24, 2020, Realogy Group LLC, a Delaware limited liability company (“Realogy Group”), an indirect wholly-owned subsidiary of Realogy Holdings Corp. (“Realogy Holdings” and, together with its wholly-owned subsidiaries, including Realogy Group, collectively, the “Company,” “we,” “us” or “our”), entered into (1) a ninth amendment (the “Ninth Amendment”) to the Amended and Restated Credit Agreement, dated as of March 5, 2013 (as amended, amended and restated, modified or supplemented from time to time, the “Credit Agreement”, which includes our Revolving Credit Facility), among Realogy Intermediate Holdings LLC (“Intermediate Holdings”, which is the direct wholly-owned subsidiary of Realogy Holdings and the holder of all of the outstanding membership interests of Realogy Group), Realogy Group, the several lenders from time to time parties thereto and JPMorgan Chase Bank, N.A., as administrative agent; and (2) a third amendment (the “Third Amendment”) to the Term Loan Agreement, dated as of October 23, 2015 (as amended, amended and restated, modified or supplemented from time to time, the “Term Loan A Agreement”), among Intermediate Holdings, Realogy Group, the lenders party thereto from time to time and JPMorgan Chase Bank, N.A., as administrative agent.
The Ninth Amendment and Third Amendment are referred to collectively herein as the “Amendments” and the Credit Agreement and Term Loan A Agreement are referred to collectively herein as the “Senior Secured Credit Facilities.”
Pursuant to the Amendments, the financial covenant contained in each of the Senior Secured Credit Facilities has been amended to require that Realogy Group maintain a senior secured leverage ratio not to exceed 6.50 to 1.00 commencing with the third quarter of 2020 through and including the second quarter of 2021, which will then step down to 5.50 to 1.00 for the third quarter of 2021 and thereafter will step down by 0.25 on a quarterly basis to 4.75 to 1.00 (which was the applicable level prior to the effectiveness of the Amendments) on and after the second quarter of 2022.
The Amendments also tighten certain existing covenants during the period commencing on July 24, 2020 until the Company issues its financial results for the third quarter of 2021 and concurrently delivers an officer’s certificate to its lenders showing compliance with the senior secured leverage ratio, subject to earlier termination (the “Covenant Relief Period”). If Realogy Group’s senior secured leverage ratio does not exceed 5.50 to 1.00 for the fiscal quarter ending June 30, 2021, the Covenant Relief Period will end at the time the Company delivers the compliance certificate to the lenders for such period; however, in either instance, the gradual step down in the senior secured leverage ratio, as described above, will continue to apply. The covenants revised pursuant to the Amendments during the Covenant Relief Period include the reduction or elimination of the amount available for certain types of additional indebtedness, liens, restricted payments (including dividends and stock repurchases), investments (including acquisitions and joint ventures), and voluntary junior debt repayments. In addition, the Amendments establish that during the Covenant Relief Period, if after giving effect to the use of proceeds of any borrowing under the Revolving Credit Facility at such time, the Consolidated Cash Balance (as defined in the Amendments) exceeds $350 million, the Company must prepay the Revolving Credit Facility in an amount equal to the lesser of (x) the amount necessary to reduce the Consolidated Cash Balance to $350 million and (y) the amount of such borrowing.
The Company also may elect to end the Covenant Relief Period at any time, provided the senior secured leverage ratio does not exceed 4.75 to 1.00 as of the most recently ended quarter for which financial statements have been delivered. In such event, the leverage ratio will reset to the pre-Amendment level of 4.75 to 1.00 thereafter.
The foregoing summary of the Amendments is not complete and is qualified in its entirety by reference to the full and complete text of the Ninth Amendment and the Third Amendment, copies of which are attached hereto as Exhibits 10.1 and 10.2 and incorporated herein by reference.