Debt

9 Months Ended

Oct. 02, 2022

Debt

Debt

5.Debt

New Revolving Facility

During November 2021, the Company entered into a Credit Agreement with Bank of America (the “Credit Agreement”) to provide the New Revolving Facility that provides for borrowings up to $50.0 million (the "New Revolving Facility"). During the term of the Credit Agreement, the Company can increase the aggregate amount of the New Revolving Facility up to an additional $25.0 million (for maximum aggregate lender commitments of up to $75.0 million), subject to the satisfaction of certain conditions under the Credit Agreement, including obtaining the consent of the administrative agent and an increased commitment from existing or new lenders. In addition, the Credit Agreement may be used to issue letters of credit up to $7.5 million (“Letter of Credit”). During the thirty-nine weeks ended October 2, 2022, the Company borrowed $20 million under the New Revolving Facility and repaid $30.0 million of the outstanding balance. The New Revolving Facility matures on November 15, 2024, while the Letter of Credit matures on November 8, 2024. As of October 2, 2022, we had $0.3 million outstanding under the Letter of Credit. As of October 2, 2022, we had $34.8 million available for borrowing under the New Revolving Facility and $7.3 million available to issue letters of credit.

All borrowings under the Credit Agreement accrue interest at a rate equal to, at the Company’s option, either (x) the term daily SOFR, plus the applicable SOFR adjustment plus a margin of 1.75% per annum or (y) the base rate plus a margin of 0.75% (with the base rate being the highest of the federal funds rate plus 0.50%, the prime rate and term SOFR for a period of one month plus 1.00%). Additionally, a commitment fee of 37.5 basis points will be assessed on unused commitments under the New Revolving Facility, taking into account the sum of outstanding borrowings and Letter of Credit obligations. As of October 2, 2022, the interest rate for the New Revolving Facility was 4.8%. During the thirteen and thirty-nine weeks ended October 2, 2022, the effective interest rate for the New Revolving Facility was 4.7% and 3.7%, respectively.

Amounts borrowed under the Credit Agreement are collateralized by all assets of the Company and contains various financial and non-financial covenants for reporting, protecting and obtaining adequate insurance coverage for assets collateralized and for coverage of business operations, and complying with requirements, including the payment of all necessary taxes and fees for all federal, state and local government entities. Immediately upon the occurrence and during the continuance of an event of default, including the noncompliance with the above covenants, the lender may increase the interest rate per annum by 2.0% above the rate that would be otherwise applicable. As of October 2, 2022, management has determined that the Company was in compliance with all financial covenants.

Term Loan

In August 2017, the Company entered into a term loan with a principal amount of $135.0 million (the “Term Loan”) and a revolving credit facility of $10.0 million (the “Revolving Facility”) with certain financial institutions for which Credit Suisse acted as an administrative agent (the “Credit Facility”).

During April 2021, the Company entered into the sixth amendment to the Credit Facility (“Sixth Amendment”), which: 1) Amended the minimum liquidity covenant from $2.5 million to $10.0 million, 2) Extended the due date for the 2020 audited consolidated financial statements to September 30, 2021, and 3) Upon receipt of proceeds from an IPO, Special Purpose Acquisition Company transaction, or other liquidity transaction that involves the equity of Lulus or its affiliates, the Company was required to pay off the outstanding obligations under the Credit Facility before any proceeds were utilized by the Company. There was no gain or loss arising from the Sixth Amendment as it was considered to be a debt modification.

During November 2021, the Company utilized the proceeds from the IPO and the New Revolving Facility to repay the $105.8 million of outstanding principal and $1.4 million of accrued interest related to the Term Loan. The Credit Facility was terminated on November 15, 2021 and no prepayment penalties were incurred.

The effective interest rate on the Term Loan was 13.0% and 12.9% for the thirteen and thirty-nine weeks ended October 3, 2021.

Revolving Facility

Outstanding amounts under the Revolving Facility bore interest at variable rates with a minimum of 7.00%. The Revolving Facility was terminated on November 15, 2021. The effective interest rate for the Revolving Facility was 11.3% for the thirty-nine weeks ended October 3, 2021.  No amounts were outstanding under the Revolving Facility as of October 3, 2021.

Debt Discounts and Issuance Costs

Debt discounts and issuance costs are deferred and amortized over the life of the related loan using the effective interest method. The associated expense is included in interest expense in the condensed consolidated statements of operations and comprehensive income. Debt discounts and issuance costs are presented as a reduction of long-term debt

with the exception of debt issuance costs related to the New Revolving Facility, which are included in other non-current assets in the condensed consolidated balance sheets. As of October 2, 2022 and January 2, 2022, unamortized debt issuance costs recorded within other non-current assets were $0.3 million and $0.4 million, respectively.

Future minimum payments of principal on the Company’s outstanding debt were as follows (in thousands):

Fiscal Year Ending	Amounts
2022 (remaining thirteen weeks)	$	—
2023		—
2024		15,000
Total principal amount	$	15,000