H&R Block Inc. (HRB) announced that its wholly owned subsidiary, Block Financial LLC, entered into a new five-year, $1.5 billion Credit and Guarantee Agreement, which will expire on August 17, 2017 unless extended pursuant to the terms of the agreement. Funds available under the new agreement may be used for general corporate purposes or working capital needs.
The new agreement contains customary representations, warranties, covenants and events of default. The agreement also includes two primary financial covenants that require the consolidated enterprise to maintain (1) a debt-to-EBITDA ratio no greater than 3.50 for fiscal quarters ending on April 30, July 31, and October 31 of each year, and no greater than 3.75 for the fiscal quarter ending on January 31 of each year; and (2) an interest coverage (EBITDA to interest expense) ratio of no less than 2.50 as of the last date of any fiscal quarter.
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