According to an 8K filed with the SEC, Bank of America served as administrative agent, collateral agent, swing line lender and L/C issuer for the second amendment to Hilton Grand Vacations’ $1 billion credit agreement initially dated Dec. 28, 2016, and originally amended Nov. 28, 2018.
The amendment provides Hilton Grand Vacations with near-term covenant relief and long-term flexibility by structurally and permanently raising certain covenants related to financial maintenance, incurrence of debt, investments in the business and restricted payments.
“This amendment provides significant near-term flexibility to mitigate the impact of the COVID-19 pandemic, protecting our ability to invest in the business and positioning us for recovery with permanently wider latitude on covenants,” Dan Mathewes, CFO of Hilton Grand Vacations, said. “It also demonstrates the value of having a committed and strong partnership with our relationship banks, who believe in the long-term health of the company’s business model.”
The amendment amended Hilton Grand Vacations’ financial covenants and does not permit the consolidated first lien net leverage ratio to exceed the following ratios as of any test period ended or ending as specified below:
- After March 31, 2020, but on or prior to June 30, 2020: 3-to-1
- After June 30, 2020, but on or prior to Dec. 31, 2020: 3.5-to-1
- After Dec. 31, 2020, but on or prior to June 30, 2021: 3.25-to-1
- After June 30, 2021: 3-to-1
Prior to the second amendment, the ratio was 2-to-1 for all periods. As of March 31, 2020, the first lien net leverage ratio for covenant compliance purposes was 0.62-to-1.
In addition to changes in the financial maintenance covenants, Hilton Grand Vacations permanently expanded certain first lien net leverage and total leverage covenants for testing purposes with respect to incurrence of debt, restricted payments and investments as described fully in the 8K.
For the purposes of calculating certain financial covenants, Hilton Grand Vacations may, by providing the requisite notice to the administrative agent and complying with other requirements set forth in the amended credit agreement, elect to calculate the consolidated EBITDA on an annualized basis for the applicable test period as follows:
- Test period ending on Dec. 31, 2020: Four times the consolidated EBITDA for the fiscal quarter ending Dec. 31, 2020
- Test period ending March 31, 2021: Two times the sum of the consolidated EBITDA for the fiscal quarters ending Dec. 31, 2020, and March 31, 2021
- Test period ending June 30, 2021: Four-third times the sum of the consolidated EBITDA for the fiscal quarters ending Dec. 31, 2020, March 31, 2021, and June 30, 2021.
Consolidated EBITDA in all periods above is adjusted for deferrals or recognitions, along with other items as indicated per the agreement.
Hilton Grand Vacations is timeshare company that develops, markets and operates a system of vacation ownership resorts.