Hanover Insurance inks $200 million five-year revolving credit facility

By Susanna Moon

Chicago, Nov. 18 - Hanover Insurance Group, Inc. obtained a $200 million five-year unsecured revolving credit facility.

The company entered into a credit agreement on Nov. 12 with JPMorgan Chase Bank, NA as administrative agent, according to an 8-K filing with the Securities and Exchange Commission. Lloyds Bank plc and Wells Fargo Bank, NA are the co-syndication agents.

The facility allows the company an option to increase the facility to up to $300 million, in increments of $10 million.

The agreement includes a subfacility of $50 million for standby letters of credit.

The company may use the line of credit for general corporate purposes for itself and its subsidiaries.

Interest on the loans ranges from Libor plus 125 basis points to 162.5 bps based on the company's debt rating.

The facility replaces the credit agreement dated Aug. 2, 2011 with Wells Fargo Bank, NA as administrative agent.

Fees on outstanding letters of credit are payable quarterly and range from 125 bps to 162.5 bps.

The agreement contains financial covenants substantially similar to those in its prior credit agreement that require the company and its subsidiaries to maintain a specified minimum net worth, restrict the company and its subsidiaries from exceeding a specified leverage ratio and require some of the company's subsidiaries to maintain a minimum risk-based capital ratio.

In addition, the agreement contains covenants that limit the company's and its subsidiaries' ability to incur or assume debt, grant liens on its property, merge or consolidate, dispose of assets, materially change the nature or conduct of its business and make restricted payments.

Chaucer standby letter facility

Chaucer Holdings plc, a wholly owned indirect subsidiary of Hanover Insurance Group, Inc., amended its standby letter of credit facility being used to provide funds at Lloyd's for the 2013 year.

The amended agreement provides for a sterling-denominated letter of credit facility of up to £130 million outstanding at any one time, with the option to increase the amount available for issuances of letters of credit to £195 million. The agreement will become effective upon receipt of approval from the Society of Lloyd's, with the approval expected by Nov. 27.

Lloyds Bank plc, Barclays Bank plc and Royal Bank of Scotland plc are the mandated lead arrangers and Lloyds Bank plc is the bookrunner, overdraft provider, facility agent.

The agreement amends the $180 million standby letter-of-credit facility dated Nov. 28, 2011.

A letter-of-credit commission fee on outstanding letters of credit is payable quarterly and ranges from 137.5 bps to 175 bps, based on the company's credit ratings. The letter-of-credit commission fee on any portion of any letter of credit that is cash collateralized is 27.5 bps. The unused fee ranges from 55 bps to 70 bps, based on the company's credit ratings.

Hanover is a Worcester, Mass.-based property and casualty insurance company.

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