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CB Richard Ellis gets a break from bankers

The commercial real estate services giant, hurt by the dismal real estate market and prolonged credit freeze, renegotiates its credit agreement with dozens of lenders.

March 25, 2009|Roger Vincent

International commercial real estate services giant CB Richard Ellis Group Inc., which has been thrashed by the dismal real estate market and prolonged credit freeze, has gotten a break from its bankers, the company said Tuesday.

CB Richard Ellis renegotiated its credit agreement with dozens of lenders, it said.

Under the new agreements, the company may now experience a further decrease in revenue without triggering violations of the terms of its loans.

Violations could prompt the lenders to demand full payment of their loans, forcing the company into an untenable financial situation.

As part of its bargain with lenders, CB Richard Ellis reduced its outstanding debt Tuesday with a voluntary pre-payment of $105 million, covering about two quarters' worth of scheduled amortization payments, the company said.

Chief Executive Brett White said last month that CB Richard Ellis would probably seek an amendment or waiver to certain loan covenants.

He made the announcement a day after the Los Angeles company released financial statements showing a 94% drop in profit during the fourth quarter.

Tuesday's payment brought the company's debt down to about $400 million coming due over the next two years, CB Richard Ellis said.

Under the terms of the agreement with its lenders, CB Richard Ellis will pay higher interest fees but be allowed to have a higher ratio of net debt to cash flow, easing the danger of violating loan covenants as the company copes with a tough real estate market.

Few properties are changing hands, and commissions for brokerages such as CB Richard Ellis have fallen dramatically from the mid-2000s.

The agreement should ease fears on Wall Street, analyst Will Marks of JMP Securities said.

"This puts a major obstacle behind the company, and it can now focus on its operating business," Marks said. "The company will have no trouble managing its payments with cash flow."

CEO White said in a statement, "We are pleased with this vote of confidence from our lenders and thank them for their support.

"The amendment will significantly increase our financial flexibility, and should further support our continued compliance even if market conditions weaken further."

Shares of CB Richard Ellis rose 5 cents to $3 on Tuesday.


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