| Debt | NOTE 14 – DEBT
Long-term debt consisted of the following:
March 26, 2016 December 26, 2015 March 28, 2015
ABL Facility, maturing in 2019 $ 11,600 $
— $ 23,700
Term Loan, maturing in 2019 130,279 132,100 142,680
Term Loan Original Issue Discount (1,743 ) (1,859 ) (2,188 )
Unamortized Term Loan Debt Issuance Costs (4,274 ) (4,590 ) (5,378 )
Deferred Cash Payment Obligations, maturing in 2019 18,949 18,608 17,570
Total debt 154,811 144,259 176,384
Less: Current maturities (11,600 ) (1,821 ) (24,999 )
Total long-term debt $ 143,211 $ 142,438 $ 151,385
ABL Facility
On June 11, 2013, the Company entered into a Loan Agreement
(the “Asset-Based Credit Agreement”) by and among the
Company, Bank of America, N.A., as Agent, SunTrust Bank, as
Syndication Agent, Merrill Lynch, Pierce, Fenner & Smith
Incorporated and SunTrust Robinson Humphrey, Inc., as Joint Lead
Arrangers and Bookrunners, and the Lenders that are party to the
Asset-Based Credit Agreement (the “Asset-Based
Lenders”).
Under the Asset-Based Credit Agreement, the Asset-Based Lenders
agreed to provide a revolving senior secured asset-based credit
facility (the “ABL Facility”) in an aggregate principal
amount of $175,000. As of August 7, 2015, the aggregate
commitments were permanently reduced, at the election of the
Company, by $50,000, from $175,000 to $125,000.
Outstanding amounts under the ABL Facility will bear interest at a
rate per annum equal to, at the Company’s election:
(1) a base rate (equal to the greatest of ( a b c
In November 2014, the Company amended the ABL Facility. The main
purpose for the amendment was to provide the Company additional
flexibility in its execution of certain restructuring actions by
increasing the cap on the amount that may be added back under the
definition of earnings before interest, taxes, depreciation, and
amortization (“EBITDA”) for non-recurring, unusual or
extraordinary charges, business optimization expenses or other
restructuring charges or reserves and cash expenses relating to
earn outs or similar obligations.
In September 2015, the Company amended the ABL Facility. The main
purposes for the amendment were to reduce the Applicable Margin for
base rate and LIBOR loans, reduce the unused line fee rate and
extend the scheduled maturity date. As amended, the maturity date
is extended to September 16, 2020, which shall automatically
become March 12, 2019 unless the Company’s term loan
facility has been repaid, refinanced, redeemed, exchanged or
amended prior to such date, in the case of any refinancing or
amendment, to a date that is at least 90 days after the scheduled
maturity date. In addition, the amendment provided for the
withdrawal of Sun Trust Bank as a lender and the assumption of its
commitments by the remaining lenders. As a result of this
amendment, the Company recorded a loss on the early extinguishment
of debt of $877, which represented the non-cash charge associated
with the acceleration of a portion of the remaining unamortized
debt issuance costs.
The effective interest rate under the ABL Facility for the three
months ended March 26, 2016 was 12.24%, which includes
interest on borrowings of $67, amortization of loan origination
fees of $195 and commitment fees on unborrowed funds of $105. As of
March 26, 2016, the outstanding balance on the ABL Facility
was $11,600.
The Company may prepay advances under the ABL Facility in whole or
in part at any time without penalty or premium. The Company will be
required to make specified prepayments upon the occurrence of
certain events, including: (1) the amount outstanding on the
ABL Facility exceeding the Borrowing Base (as determined in
accordance with the terms of the ABL Facility), and (2) the
Company’s receipt of net cash proceeds of any sale or
disposition of assets that are first priority collateral for the
ABL Facility.
Pursuant to a Guaranty and Collateral Agreement dated as of
June 11, 2013 (the “ABL Security Agreement”), the
ABL Facility is secured by a first priority security interest in
substantially all assets of the Company and the guarantor
subsidiaries. Under an intercreditor agreement between the
Asset-Based Lenders and the Term Loan Lenders, as defined and
described below, the Asset-Based Lenders have a first priority
security interest in substantially all working capital assets of
the Company and the guarantor subsidiaries, and a second priority
security interest in all other assets, subordinate only to the
first priority security interest of the Term Loan Lenders in such
other assets.
The Asset-Based Credit Agreement contains customary events of
default and financial, affirmative and negative covenants,
including but not limited to a springing financial covenant
relating to the Company’s fixed charge coverage ratio and
restrictions on indebtedness, liens, investments, asset
dispositions and dividends and other restricted payments.
Term Loan
Also on June 11, 2013, the Company entered into a Credit
Agreement (the “Term Loan Credit Agreement”) among the
Company, Credit Suisse AG, as Administrative Agent and Collateral
Agent, and the Lenders defined in the Term Loan Credit Agreement
(the “Term Loan Lenders”). In November, 2014, the
Company amended the Term Loan Credit Agreement. The main purpose
for the amendment was to provide the Company additional flexibility
in its execution of certain restructuring actions by increasing the
cap on the amount that may be added back under the definition of
consolidated EBITDA for non-recurring, unusual or extraordinary
charges, business optimization expenses or other restructuring
charges or reserves and cash expenses relating to earn outs or
similar obligations.
Under the Term Loan Credit Agreement, the Term Loan Lenders agreed
to make a term loan (the “Term Loan”) to the Company in
aggregate principal amount of $145,000, including an original issue
discount of $2,900. The outstanding principal amount of the Term
Loan will bear interest at a rate per annum equal to the applicable
LIBOR rate (with a 1% floor) plus 8.50%, or the base rate plus a
margin of 7.50%. Interest on loans under the Term Loan Credit
Agreement bearing interest based upon the base rate will be due
quarterly in arrears, and interest on loans bearing interest based
upon the LIBOR Rate will be due on the last day of each relevant
interest period or, if sooner, on the respective dates that fall
every three months after the beginning of such interest period.
The effective interest rate under the term loan credit facility for
the three months ended March 26, 2016 was 10.80%, which
includes interest on borrowings of $3,169, amortization of loan
origination fees of $316 and original issue discount amortization
of $116. On September 21, 2015, the Company elected to make a
$10,000 prepayment on the Term Loan. As a result of the prepayment,
the Company incurred a $200 early prepayment fee. As of
March 26, 2016, the outstanding balance on the Term Loan
Credit Agreement was $128,536, net of the unamortized original
issue discount. The original issue discount is being amortized as
additional interest expense on a straight-line basis over the life
of the Term Loan.
The Term Loan matures on June 11, 2019. The Term Loan Credit
Agreement requires prepayments at specified levels upon the
Company’s receipt of net proceeds from certain events,
including: (1) certain dispositions of property, divisions,
business units or business lines; and (2) other issuances of
debt other than Permitted Debt (as defined in the Term Loan Credit
Agreement). The Term Loan Credit Agreement also requires
prepayments at specified levels from the Company’s excess
cash flow. The Company is also permitted to voluntarily prepay the
Term Loan in whole or in part. Any prepayments are to be made at
par, plus an early payment fee calculated in accordance with the
terms of the Term Loan Credit Agreement, as amended, if prepaid
prior to October 31, 2016.
Pursuant to a Guarantee and Collateral Agreement dated as of
June 11, 2013 (the “Term Loan Security
Agreement”), the Term Loan is secured by a first priority
security interest in substantially all assets of the Company and
the guarantor subsidiaries. Under an intercreditor agreement
between the Asset-Based Lenders and the Term Loan Lenders, the Term
Loan Lenders have a second priority security interest in
substantially all working capital assets of the Company and the
subsidiary guarantors, subordinate only to the first priority
security interest of the Asset-Based Lenders in such assets, and a
first priority security interest in all other assets.
The Term Loan Credit Agreement contains customary events of default
and financial, affirmative and negative covenants, including but
not limited to quarterly financial covenants, relating to the
Company’s (1) minimum interest coverage ratio and
(2) maximum net total leverage ratio and restrictions on
indebtedness, liens, investments, asset dispositions and dividends
and other restricted payments.
The Term Loan required the Company to enter into an interest rate
hedge, within 90 days of the Effective Date, in an amount equal to
at least 50% of the aggregate principal amount outstanding under
the Term Loan. The purpose of the interest rate hedge is to
effectively subject a portion of the Term Loan to a fixed or
maximum interest rate. As such, the Company entered into an
interest rate swap agreement on August 27, 2013 that
effectively fixes the interest payments on a portion of the
Company’s variable-rate debt. The swap, which has a
termination date of September 11, 2016, effectively fixes the
LIBOR-based interest rate on the debt in the amount of the notional
amount of the swap at 9.985%. The notional amount of the swap at
March 26, 2016 was $72,500. During the three months ended
March 26, 2016, the fair value of the derivative increased by
$85 and a gain of $85 was recognized. During the three months ended
March 28, 2015, the fair value of the derivative decreased by
$52 and a loss of $52 was recognized. The gain or loss related to
the derivative was recorded in “Change in fair value of
interest rate swap” on the consolidated statement of
operations.
Under this swap agreement, the Company will pay the counterparty
interest on the notional amount at a fixed rate per annum of 1.485%
and the counterparty will pay the Company interest on the notional
amount at a variable rate per annum equal to the greater of 1-month
LIBOR or 1.0%. The 1-month LIBOR rate applicable to this agreement
was 0.435% at March 26, 2016. The notional amounts do not
represent amounts exchanged by the parties, and thus are not a
measure of exposure of the Company. The amounts exchanged are
normally based on the notional amounts and other terms of the
swaps. The variable rates are subject to change over time as
1-month LIBOR fluctuates.
The Company has estimated that the fair value of its Term Loan
(valued under Level 3) as of March 26, 2016 approximated the
carrying value of $130,279.
Deferred Cash Payment Obligations
In connection with the Reorganization Plan, general unsecured
creditors are entitled to receive a deferred cash payment
obligation of 20% of the allowed claim in full settlement of the
allowed unsecured claims. Such payment accrues quarterly
paid-in-kind interest of 5% per annum beginning on the
Effective Date. Trade unsecured creditors had the ability to make a
trade election to provide agreed upon customary trade terms. If the
election was made, those unsecured trade creditors received a
deferred cash payment obligation of 45% of the allowed claim in
full settlement of those claims. As of the Effective Date, the
deferred payment obligations under the trade elections began to
accrue quarterly paid-in-kind interest of 10% per annum. All
deferred cash payment obligations, along with interest
paid-in-kind, are payable in December 2019.
The Company’s reconciliation of general unsecured claims was
completed in fiscal 2015. As of March 26, 2016, the
Company’s deferred payment obligations were $18,949, of which
$3,030 represents a 20% recovery for the general unsecured
creditors and $12,099 represents a 45% recovery for those creditors
who elected to provide the Company standard trade terms with the
remaining $3,820 related to accrued paid-in-kind interest. |
