Lexmark 2009 Annual Report Download - page 65

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Additional Sources of Liquidity
Credit Facility
Effective August 17, 2009, Lexmark entered into a new $275 million 3-year senior, unsecured, multi-
currency revolving credit facility with a group of banks. Under this new credit facility (the “New Facility”), the
Company may borrow in U.S. dollars, euros, British pounds sterling and Japanese yen. On August 26,
2009, the Company entered into two commitment agreements that increased the available credit under the
New Facility to $300 million which was the same amount available under the prior facility that was
terminated by the new agreement. The New Facility includes commitments from nine financial institutions
ranging from $15 million to $60 million. Proceeds of the loans may be used to repay existing indebtedness,
finance working capital needs, and for general corporate purposes of the Company.
The New Facility contains usual and customary default provisions, leverage and interest coverage
restrictions and certain restrictions on, among other things, the Company’s indebtedness, disposition
of assets, liens and mergers and acquisitions. The minimum interest coverage ratio and maximum
leverage ratio financial covenants are substantially the same as those that existed under the prior
facility. The ratios are calculated in accordance with the New Facility and may not be comparable to
similarly titled measures used by other registrants. The Company is not aware at this time of a likely breach
or any known trends that would affect future compliance. At December 31, 2009, the Company was
comfortably in compliance with respect to these financial covenant ratios.
The New Facility also includes collateral terms providing that in the event the Company’s credit ratings
decrease to certain levels (Moody’s Ba2 or lower, S&P BB or lower) the Company will be required to secure
on behalf of the lenders first priority security interests in the Company’s owned U.S. assets. These
collateral arrangements will be released upon the Company achieving certain improvements in its credit
ratings (Moody’s Baa3 or higher, S&P BBB- or higher).
Interest on all borrowings under the New Facility depends upon the type of loan, namely alternative base
rate borrowings, swingline loans or eurocurrency borrowings. Alternative base rate borrowings bear
interest at the greater of the prime rate, the federal funds rate plus one-half of one percent, or the adjusted
LIBO rate (as defined in the New Facility) plus one percent. Swingline loans (limited to $50 million) bear
interest at an agreed upon rate at the time of the borrowing. Eurocurrency loans bear interest at the sum of
(i) a LIBOR for the applicable currency and interest period and (ii) the credit default swap spread as defined
in the New Facility subject to a floor of 2.5% and a cap of 4.5%. In addition, Lexmark is required to pay a
commitment fee on the unused portion of the New Facility of 0.40% to 0.75% based upon the Company’s
debt ratings. The interest and commitment fees are payable at least quarterly.
As of December 31, 2009 and 2008, there were no amounts outstanding under the credit facilities.
Additional information related to the 2009 credit agreement can be found in the Form 8-K and Form 8-K/A
reports that were filed with the SEC by the Company in August 2009.
Trade Receivables Facility
In the U.S., the Company transfers a majority of its receivables to its wholly-owned subsidiary, Lexmark
Receivables Corporation (“LRC”), which then may transfer the receivables on a limited recourse basis to
an unrelated third party. The financial results of LRC are included in the Company’s consolidated financial
results since it is a wholly owned subsidiary. LRC is a separate legal entity with its own separate creditors
who, in a liquidation of LRC, would be entitled to be satisfied out of LRC’s assets prior to any value in LRC
becoming available for equity claims of the Company. The Company accounts for transfers of receivables
from LRC to the unrelated third party as a secured borrowing with the pledge of its receivables as collateral
since LRC can repurchase receivables previously transferred to the unrelated third party.
In October 2008, commitments to the facility were renewed by one of the two banks, resulting in a decrease
in the maximum capital availability from $200 million to $100 million. In October 2009, the term of facility
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