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Line of Credit
3 Months Ended
May 02, 2020
Debt Disclosure [Abstract]  
Line of Credit
(5)
Line of Credit
On March 20, 2020, the Company exercised its right under the Fourth Amended and Restated Loan and Security Agreement, executed on May 10, 2017 (the "Prior Credit Agreement') to increase the aggregate commitments under the Revolving Credit Facility from $20 million to $50 million.
On April 24, 2020, the Company entered into a Fifth Amended and Restated Credit Agreement (the “Fifth Restated Credit Agreement”), among the Company, 1616 Holdings, Inc., a wholly-owned subsidiary of the Company ("1616 Holdings"), and Wells Fargo Bank, National Association as administrative agent (the “Agent”), and other lenders. The Fifth Restated Credit Agreement amends and restates the Prior Credit Agreement which governed the Revolving Credit Facility.
The Fifth Restated Credit Agreement includes a secured asset-based revolving line of credit in the amount of up to $225.0 million (the “Amended Revolving Credit Facility”). Pursuant to the Fifth Restated Credit Agreement, advances under the Amended Revolving Credit Facility are tied to a borrowing base consisting of eligible credit card receivables and inventory, as reduced by certain reserves in effect from time to time. The Amended Revolving Credit Facility expires on the earliest to occur of (i) April 24, 2023 or (ii) an event of default. The Amended Revolving Credit Facility may be increased by up to $150.0 million, subject to certain conditions, including obtaining commitments from one or more lenders. The entire amount of the Amended Revolving Credit Facility is available for the issuance of letters of credit and allows for swingline loans.
The Fifth Restated Credit Agreement provides that the interest rate payable on borrowings shall be, at the Company’s option, a per annum rate equal to (a) a base rate plus an applicable margin ranging from 1.00% to 1.25% or (b) a LIBOR rate plus a margin ranging from 2.00% to 2.25%. Letter of credit fees will range from 2.00% to 2.25%. The interest rate and letter of credit fees under the Fifth Restated Credit Agreement are subject to an increase of 2.00% per annum upon an event of default.
The Fifth Restated Credit Agreement contains customary covenants that limit, absent lender approval, the ability of Company and certain of its affiliates to, among other things, pay cash dividends, incur debt, create liens and encumbrances, redeem or repurchase stock, enter into certain acquisition transactions or transactions with affiliates, merge, dissolve, repay certain indebtedness, change the nature of Company’s business, enter sale or leaseback transactions, make investments or dispose of assets. In some cases, these restrictions are subject to certain negotiated exceptions or permit Company to undertake otherwise restricted activities if it satisfies certain required conditions. In addition, the Company will be required to maintain availability of not less than (i) 15% of the lesser of (x) aggregate commitments under the Amended Revolving Credit Facility and (y) the borrowing base (the "loan cap") prior to a stepdown date (as described below) and (ii) 10% of the loan cap after the stepdown date. The stepdown date is the first date occurring after both (i) the date that 75% of the number of stores as of the closing date of the Amended Revolving Credit Facility have reopened ("store opening date") and (ii) the date occurring at least six months after the store reopening date on which the fixed charge coverage ratio is at least 1.00 to 1.00.
If there exists an event of default or availability under the Amended Revolving Credit Facility is less than 15% of the loan cap, amounts in any of the loan parties’ or subsidiary guarantors' designated deposit accounts will be transferred daily into a blocked account held by the Agent and applied to reduce outstanding amounts under the Amended Revolving Credit Facility (the “Cash Dominion Event”), so long as (i) such event of default has not been waived and/or (ii) until availability has exceeded 15% of the loan cap for sixty (60) consecutive calendar days (provided that such ability to discontinue the Cash Dominion Event shall be limited to two times during the term of the Agreement).
The Fifth Restated Credit Agreement also contains a provision stating that the Company cannot borrow in excess of $50 million under the Amended Revolving Credit Facility at any time the amount of the consolidated cash and cash equivalents of the loan parties (excluding certain long-term investments and certain other items) exceeds $50 million.
The Fifth Restated Credit Agreement contains customary events of default including, among other things, failure to pay obligations when due, initiation of bankruptcy or insolvency proceedings, defaults on certain other indebtedness, change of control, incurrence of certain material judgments that are not stayed, satisfied, bonded or discharged within 30 days, certain ERISA events, invalidity of the credit documents, and violation of affirmative and negative covenants or breach of representations and warranties set forth in the Fifth Restated Credit Agreement. Amounts under the Amended Revolving Credit Facility's may become due upon events of default (subject to any applicable grace or cure periods). Under the Fifth Restated Credit Agreement, all obligations under the Amended Revolving Credit Facility continue to be guaranteed by 1616 Holdings, Inc. and are secured by substantially all of the assets of the Company and 1616 Holdings, Inc.
During the thirteen weeks ended May 2, 2020, the Company borrowed and repaid approximately $50 million from its Amended Revolving Credit Facility. As of May 2, 2020, the Company had no borrowings under the Amended Revolving Credit Facility and had approximately $158.9 million available on the Amended Revolving Credit Agreement.
All obligations under the Amended Revolving Credit Facility are secured by substantially all of the Company's assets and are guaranteed by the Company's subsidiary. As of May 2, 2020 and May 4, 2019, the Company was in compliance with the covenants applicable to it under the Amended Revolving Credit Facility.