Subsequent Events

6 Months Ended

Aug. 01, 2020

Subsequent Events [Abstract]

Subsequent Events

SUBSEQUENT EVENTS

Termination of Credit Facility- On August 7, 2020, we replaced our Credit Facility with a five year $400.0 million, senior secured asset-based revolving credit facility ("ABL Revolver") and completed a five year, $250.0 million senior secured term loan ("Secured Term Loan"). Upon the closing of the transactions, we made an initial borrowing in the amount of $150.0 million under the ABL Revolver. These proceeds, along with the proceeds from the Secured Term Loan, were used to repay in full the outstanding borrowings under the Credit Facility and we terminated the Credit Facility.

ABL Revolver- Our ABL Revolver matures in August 2025 and is secured by substantially all of our personal property assets, including a first priority lien on credit card receivables and inventory and a second priority lien on personal property assets that constitute first priority collateral for the Secured Term Loan. The ABL Revolver provides a revolving line of credit of up to $400.0 million, including a Canadian sub-limit of up to $20.0 million, a $50.0 million sub-limit for the issuance of letters of credit, a $40.0 million sub-limit for swing loan advances for U.S. borrowing, and a $2.0 million sub-limit for swing loan advances for Canadian borrowings. The amount of credit available is limited to a borrowing base based on, among other things, a percentage of the book value of eligible inventory and credit card receivables, as reduced by certain reserves. At the closing of the ABL Revolver, the amount available for borrowing was limited to a borrowing base of $274.3 million with an initial borrowing of $150.0 million and issued letters of credit of $5.0 million resulting in $119.3 million available for additional borrowings.

Borrowings under the ABL Revolver accrue interest, at our option, at a rate equal to: (A) a base rate per annum equal to the greatest of (i) the prime rate, (ii) the overnight bank funding rate plus 0.5%, and (iii) the adjusted one-month London Interbank Offered Rate ("LIBOR") plus 1.0%; or (B) an adjusted LIBOR per annum (subject to a floor of 0.75%), plus, in each instance, an applicable rate to be determined based on average availability.

Secured Term Loan- Our Secured Term Loan requires minimum quarterly principal payments with the remaining outstanding balance due in August 2025. The Secured Term Loan has limited prepayment requirements under certain conditions. The Secured Term Loan is collateralized by a first priority lien on substantially all of our personal and real property (subject to certain exceptions), including investment property and intellectual property, and by a second priority lien on certain other personal property, primarily credit card receivables and inventory.

Borrowings under the Secured Term Loan accrue interest, at our option, at a rate equal to: (A) a base rate per annum equal to the greater of (i) 2.25%, (ii) the prime rate, (iii) the overnight bank funding rate plus 0.5%, and (iv) the adjusted one-month LIBOR plus 1.0%, plus, in each instance, 7.5%; or (B) an adjusted LIBOR per annum (subject to a floor of 1.25%), plus 8.5%.

Debt Covenants- The ABL Revolver contains a minimum availability covenant where an event of default shall occur if availability is less than the greater of $30.0 million or 10.0% of the maximum credit amount. The Secured Term Loan includes a springing covenant imposing a minimum earnings before interest, taxes, depreciation, and amortization ("EBITDA") covenant, which arises when liquidity is less than $150.0 million. In addition, the ABL Revolver and the Secured Term Loan each contain customary covenants restricting our activities, including limitations on the ability to sell assets, engage in acquisitions, enter into transactions involving related parties, incur additional debt, grant liens on assets, pay dividends or repurchase stock, and make certain other changes. There are specific exceptions to these covenants including, in some cases, upon satisfying specified payment conditions. Both the ABL Revolver and the Secured Term Loan contain customary events of default with cross-default provisions. Upon an event of default that is not cured or waived within the cure periods, in addition to other remedies that may be available to the lenders, the obligations may be accelerated, outstanding letters of credit may be required to be cash collateralized and remedies may be exercised against the collateral.

Stein Mart- On August 12, 2020, Stein Mart, one of our ABG retail partners, filed for relief under Chapter 11 of the United States Bankruptcy Code and announced its plan to liquidate inventory. The ultimate outcome of the filing and liquidation sale is subject to the oversight and approval of the bankruptcy court. We are monitoring the status of the filing and are taking appropriate actions to maximize the recovery value of the inventory we own at Stein Mart locations. As of August 1, 2020, inventory we owned at Stein Mart locations was $15.2 million at cost and we had a receivable balance due from Stein Marts of $2.1 million. We do not expect to incur material losses as a result of Stein Mart's actions.