Subsequent Event

On June 2, 2015, the Company entered into the Third Amendment to the Amended and Restated Credit Agreement (the “Third Amendment"), which amended the credit agreement, as amended (the “Credit Agreement”), governing the Company’s senior secured credit facility. The Third Amendment modified the definition of Consolidated EBIT to permit add backs for specified periods for reserves taken with respect to receivables, restructuring charges and adjustments for applying the rule of lower of cost or market to inventories, modified the Minimum Consolidated Interest Coverage Ratio to 1.60 to 1.00 for the periods ending June 30, 2015 and September 30, 2015, 1.65 to 1.00 for the period ending December 31, 2015 and 1.70 to 1.00 for the period ending March 31, 2016, modified the Maximum Consolidated Leverage Ratio to 7.60 to 1.00 for the periods ending June 30, 2015 and September 30, 2015 and 7.15 to 1.00 for the period ending December 31, 2015, modified the restricted payments covenant to permit repayment of the Company’s Senior Secured Second Lien Notes by up to $50,000 in any fiscal year, with carry forward of any unused amount into the next fiscal year, modified a covenant to provide a 90-day cure period if Uncommitted Inventories (as defined in the Credit Agreement) exceed the threshold of $250,000, but only to the extent that they do not exceed $285,000, and provides for first-lien mortgages on the Company’s facilities located in Farmville, King and Wilson, North Carolina. See Note 8 “Long-Term Debt-Senior Secured Credit Facility-Financial Covenants” to the “Notes to Consolidated Financial Statements” for further information.

On May 28, 2015, the Company’s Board of Directors approved a 1-for-10 reverse stock split of the Company’s common stock that was effective after the close of business on June 26, 2015. The Company’s shareholders granted the Board of Directors discretionary authority to effect this reverse stock split at the Company’s special meeting of shareholders held on May 27, 2015.

On May 20, 2016, the Company entered into the Fourth Amendment to the Amended and Restated Credit Agreement (the “Fourth Amendment"), which amended the Credit Agreement dated as of July 2, 2009, as amended and restated as of August 1, 2013, between the Company, certain of its subsidiaries, the lenders party thereto and Deutsche Bank Trust Company Americas, as administrative agent (as so amended and restated, the “Credit Agreement”).

The Fourth Amendment effected the following modifications to the Credit Agreement (capitalized terms are as defined in the Credit Agreement):


•	modified the threshold for the Consolidated Interest Coverage Ratio for the fiscal quarter ending March 31, 2017 from 1.90 to 1.00 to 1.65 to 1.00;


•	modified the threshold for the Consolidated Leverage Ratio for the fiscal quarter ending March 31, 2017 from 5.10 to 1.00 to 5.50 to 1.00; and

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (AS RESTATED) (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED) (continued)

Alliance One International, Inc. and Subsidiaries

(in thousands)

Note 21 - Subsequent Event (continued)


•	modified the definition of Consolidated EBIT to permit the add backs for the specified periods as set forth in the table below in connection with certain discrepancies discovered with respect to the Company’s Kenyan subsidiary:



For the Quarter Ended	Kenyan Discrepancies	Legal and Professional Costs in Respect of Kenyan Discrepancies
March 31, 2013	$(1,745,717)	0
June 30, 2013	$2,198,708	0
September 30, 2013	$(1,492,481)	0
December 31, 2013	$4,681,765	0
March 31, 2014	$7,869,112	0
June 30, 2014	$1,834,281	0
September 30, 2014	$6,606,350	0
December 31, 2014	$449,593	0
March 31, 2015	$3,577,392	0
June 30, 2015	$5,263,723	0
September 30, 2015	$5,821,224	0
December 31, 2015	0	$1,771,000
March 31, 2016	0	$6,129,000
June 30, 2016	0	$4,000,000
September 30, 2016	0	$3,500,000

Prior to the execution of the Fourth Amendment, the Company would have been in violation of one or more covenants in fiscal 2014 and 2015 as a result of improper accounting for accounts receivable, inventory, sales and cost of goods sold in Kenya. In the Fourth Amendment, the lenders modified certain financial covenants and definitions as described above and, as a result, the Company was in compliance with all such amended covenants for fiscal 2013, 2014 and 2015.

Note that in March 2016, Moody's Investors Service downgraded the Corporate Family Rating of the Company to Caa2 from Caa1. Moody's also downgraded the Probability of Default Rating to Caa2-PD from Caa1-PD, and the senior secured second lien note rating to Caa3 with a Loss Given Default (“LGD”) of 5 from Caa2 and a LGD of 5. At the same time Moody's affirmed the Company's senior secured bank credit facility rating at B1 with a LGD of 1 and the Speculative Grade Liquidity Rating at SGL-4. Standard & Poor’s (“S&P”) ratings are Corporate Credit Rating CCC+, senior secured second lien note rating CCC with a recovery rating (“RR”) of 5 and a senior secured debt rating of B with a RR of 1. Both Moody’s and S&P have outlook negative. However, the Company affirms its belief that the sources of capital it has access to are sufficient to fund its anticipated needs for fiscal years 2016 and 2017. As of March 31, 2016, available credit lines and cash were $604.5 million, comprised of $189.2 million in cash; $415.3 million of credit lines, of which $10.3 million was available under the U.S. revolving credit facility; and $405.0 million of foreign seasonal credit lines with $13.1 million exclusively for letters of credit. Notes payable to banks are typically for 180 to 270 days and are entered into each year in various locales around the world. The U.S revolver matures April 15, 2017 and the Company plans to either extend or refinance this facility during fiscal year 2017. The Company's access to capital meets its current expectations and outlook that is anticipated to provide sufficient liquidity to fulfill its future funding requirements. General deterioration of its business and the cash flow that it generates, failure to renew foreign lines or an inability to extend or refinance its U.S. revolver could impact its ability to meet its future liquidity requirements.