RLI Corp. (NYSE:RLI) Files An 8-K Entry into a Material Definitive AgreementItem 1.01 Entry into a Material Definitive Agreement.
On May 24, 2018, RLI Corp. (the “Company”) replaced its expiring credit line by entering into a Credit Agreement (the “Credit Agreement”) replacing the Company’s existing credit line with JPMorgan Chase Bank, N.A., as Administrative Agent, and JP Morgan Chase Bank, N.A., as Lead Arranger and Sole Bookrunner, and the lenders that may from time to time become parties thereto, as Lenders.
The Credit Agreement provides for an unsecured two -year, $50 million revolving credit facility (the “Credit Facility”), with two optional, one year extensions permitted if certain conditions are met. The Credit Facility includes an "accordion" feature that allows the Company, under certain circumstances, to increase the size of the Credit Facility up to $75 million.
At the Company's election, an advance may be made under the Credit Facility either: (1) for a specific one, two, three, or six-month term (“Eurodollar Borrowing”), or (2) on an overnight basis using an alternative base rate (“ABR Borrowing”)
A Eurodollar Borrowing will bear interest at a rate per annum equal to the Adjusted LIBO Rate for the applicable interest period (the sum of (a) the LIBO Rate for such period multiplied by the Statutory Reserve Rate, plus (b) the applicable margin, which ranges from 1.125% to 1.375%, depending on the Company’s debt ratings). An ABR Borrowing will bear interest at a rate per annum equal to the Alternative Base Rate (the highest of (x) the Prime Rate in effect on such day, (y) the NYFRB Rate in effect on such day plus ½ of 1%, and (z) the Adjusted LIBO Rate for a one-month interest period, plus 1%), plus the applicable margin (which ranges from 0.125% to 0.375%, depending on the Company’s debt ratings).
Commitment fees on the average daily unused portion of the Credit Facility are payable at rates per annum ranging from 0.15% to 0.225%, depending on the Company's debt ratings. The Credit Facility may be used for working capital and other general corporate purposes. The Credit Facility termination date is May 24, 2020.
The Credit Agreement contains certain affirmative and negative covenants, including those relating to, among other things, dividends, mergers, asset sales, investments and acquisitions, liens, reinsurance, transactions with affiliates, and other matters customarily restricted in such agreements. In addition, the Credit Agreement requires that the Company maintain: (a) a ratio of consolidated indebtedness to consolidated total capitalization of not more than 0.30 to 1.00, and (b) Risk-Based Capital requirements at primary insurance subsidiaries of at least 450%.
In the ordinary course of their respective businesses, the Administrative Agent and other parties to the Credit Agreement and their respective affiliates have engaged, and may in the future engage, in commercial banking, investment banking, financial advisory or other services with the Company and its affiliates for which they have in the past and/or may in the future receive customary compensation and expense reimbursement.
The foregoing description of the Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the credit agreement evidencing the Credit Agreement, which is attached hereto as Exhibit 10.1.
