Credit and Term Loan Facilities, Secured Vendor Financing Program and PPP Loan

9 Months Ended

Oct. 31, 2020

Debt Disclosure [Abstract]

Credit and Term Loan Facilities Secured Vendor Financing Program and PPP Loan

Credit and Term Loan Facilities, Secured Vendor Financing Program and PPP Loan

Credit and Term Loan Facilities

The Company is party to an amended and restated credit agreement (“the Credit Facility”) with Wells Fargo Bank, National Association ("Wells Fargo"), as lender. On February 27, 2020, the Company entered into (i) a third amendment (the “Third Amendment”) to the Credit Facility with Wells Fargo and (ii) a credit agreement (the “Term Loan Facility”) with ALCC, LLC as lender.

The Third Amendment, among other changes, (i) removed the $5.0 million revolving “first-in, last-out” tranche credit facility, which was paid in full using proceeds from the Term Loan Facility and (ii) permitted the Company to incur indebtedness under the Term Loan Facility. The Term Loan Facility provides for a delayed draw term loan facility in the aggregate principal amount of up to $10.0 million with a maturity date of August 3, 2023, and supplements the existing $50.0 million revolving Credit Facility. On February 27, 2020, the Company drew $5.0 million on the Term Loan Facility.

The Credit Agreement and the Term Loan Facility were subsequently amended on August 5, 2020, to create specific covenant basket for the PPP Loan, thus freeing up the Company's $10.0 million unsecured debt basket.

Loans under the Term Loan Facility bear interest at a rate of 10% per annum and will amortize on a straight-line basis based on a 5-year amortization period in monthly installments beginning on the first business day of the thirteenth month after the date of the initial borrowing. Borrowings under the Credit Facility will generally accrue interest at a rate ranging from 1.50% to 1.75% over the LIBOR or 0.50% to 0.75% over the Wells Fargo Prime Rate based on the amount of Average Daily Availability for the Fiscal Quarter immediately preceding each Adjustment Date, as such terms are defined in the Credit Facility. The Company has the ability to select between the LIBOR or prime based rate at the time of the cash advance. The Credit Facility has an unused commitment fee of 0.25%.

The Company expensed approximately $0.1 million of deferred financing costs during the thirteen and thirty-nine week periods ended October 31, 2020 in connection with the Credit Facility. The deferred financing costs have been combined with the balance of the deferred financing costs remaining from the prior amendment on August 3, 2018. Deferred financing costs are included in other assets on the Condensed Consolidated Balance Sheet and are being amortized as interest expense over the related term of the Second Amendment.

The Credit Facility contains customary events of default and various affirmative and negative covenants. The financial covenant contained in both the Credit Facility and the Term Loan Facility requires the Company to maintain Availability, as such term is defined in the respective Facilities, at least equal to the greater of (a) ten percent (10%) of the borrowing base or (b) $3.0 million. In addition, the Credit Facility permits the payment of dividends to the Company's stockholders if certain financial conditions are met. In addition, the Term Loan Facility requires the Company to maintain specified levels of consolidated EBITDA when the outstanding principal balance exceeds $5.0 million. The Company was in compliance with all financial covenants and other financial provisions of the Credit Facility and Term Loan Facility as of October 31, 2020.

The Company's obligations under the Credit Facility and Term Loan Facility are secured by the assets of the Company and its subsidiaries. The Company has pledged substantially all of its assets as collateral security for the loans, including accounts owed to the Company, bank accounts, inventory, other tangible and intangible personal property, intellectual property (including patents and trademarks), and stock or other evidences of ownership of 100% of all of the Company's subsidiaries.

There were $10.1 million and zero in outstanding borrowings under the Credit Facility as of October 31, 2020 and February 1, 2020, respectively. The capped borrowing base at October 31, 2020 was approximately $32.2 million. As of October 31, 2020, the Company had open on-demand letters of credit of approximately $12.0 million. Accordingly, after reducing the capped borrowing base, current borrowings of $10.1 million, open letters of credit and the required minimum availability of the greater of $3.3 million, or $3.0 million (10.0% of the revolving loan cap), the net availability of revolving credit loans under the Credit Facility was approximately $6.8 million at October 31, 2020.

Secured Vendor Financing Program

On August 5, 2020, Christopher & Banks Company, a subsidiary of the Company, entered into a secured vendor program agreement with ALCC, LLC (the “Program Agreement”), in order to improve cash flow and to better align the Company's payment for inventory when it is sold. Under the Program Agreement, ALCC may purchase up to $10 million of inventory from Christopher & Banks Company’s vendors on behalf of Christopher & Banks Company (the “Inventory”). Christopher & Banks Company must pay ALCC for the Inventory either when Christopher & Banks Company sells the Inventory or 180 days after ALCC purchases the Inventory. Christopher & Banks Company must pay ALCC a 1.0% origination fee on amounts funded under the Program Agreement. Christopher & Banks Company is required to pay weekly interest ranging from 5.0% to 6.0% on any unsold Inventory at rates determined in the Program Agreement. The Program Agreement will remain in effect until August 3, 2023 unless terminated earlier in accordance with its terms.

Because the payment terms for the suppliers that have chosen to participate in the Secured Vendor Financing Program are longer than standard industry practice, these amounts, which totaled $3.9 million as of October 31, 2020, have been excluded from accounts payable in the Condensed Consolidated Balance Sheet as the amounts are included in short-term borrowings.

Paycheck Protection Program Loan (PPP Loan)

On June 2, 2020, the Company was granted the PPP Loan from Cache Valley Bank in the aggregate amount of $10.0 million, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The PPP Loan, which required a note dated June 1, 2020 issued by the Company, matures on June 1, 2022 and bears interest at a rate of 1.00% per annum, payable monthly commencing on December 1, 2020. The Company may prepay the note at any time prior to maturity with no prepayment penalties. The Company may only use funds from the PPP Loan for purposes specified in the CARES Act and related PPP rules, which include payroll costs, costs used to continue group health care benefits, rent, and utilities; other uses will constitute a default under the PPP Loan.

The Company used the entire PPP Loan amount for qualifying expenses during fiscal June, July and August of 2020. Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act during the 24-week period commencing on the date of disbursement of the Loan. On October 27, 2020, Cache Valley Bank submitted the Company's PPP Loan forgiveness application to the SBA. The SBA has 90 days to review and issue a decision regarding forgiveness. The Company believes that the SBA will approve the PPP Loan forgiveness application and that the loan principal will be entirely forgiven under the CARES Act.