Item 1.01. Entry into a Material Definitive Agreement.
The information provided in Item 2.03 below is incorporated herein by reference, as applicable.
Item 1.02 Termination of a Material Definitive Agreement
In connection with entry into the Credit Agreement described below under “Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant,” Calavo Growers, Inc. (the “Company”), repaid in full all outstanding indebtedness under its existing credit agreement, dated June 14, 2016 (as amended or otherwise modified prior to the date hereof, the “Existing Credit Facility”).
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
On June 26, 2023 (the “Closing Date”), the Company and certain subsidiaries of the Company (collectively, the “Borrower”) entered into a credit agreement (the “Credit Agreement”) by and among, the Borrower, certain subsidiaries of the Company as guarantors, and Wells Fargo Bank, National Association, as agent and lender (“Agent”). The Credit Agreement provides for a revolving credit facility of up to $90.0 million (the “Revolving Loans”), along with an undrawn capex credit facility of up to $10.0 million (the “CapEx Loans”, and together with the Revolving Loans, the “New Credit Facility”).
The initial proceeds of the Revolving Loans were used to repay all outstanding amounts under the Company’s Existing Credit Facility and to pay related transaction fees and expenses, and following the Closing Date will be used for working capital and other general corporate purposes. For a period of one year following the Closing Date, the Borrower may utilize the proceeds of the CapEx Loans to pay a certain percentage of the costs of certain equipment purchased by the Borrower.
Borrowings of the Revolving Loans under the Credit Agreement are asset based and will be subject to a borrowing base calculation that includes a certain percentage of eligible accounts receivable, inventory and equipment of the Borrower, less any reserves implemented by Agent in its permitted discretion; provided that the equipment based portion of such borrowing base calculation will reduce monthly following the Closing Date.
Borrowings under the Credit Agreement bear interest at a rate per annum equal to an applicable margin, plus, at the Borrower's option, either a base rate or a secured overnight financing rate (“SOFR”) term rate (which includes a spread adjustment of 0.10% and is subject to a floor of 0.00%). The applicable margin is (i) for Revolving Loans, 0.50% for base rate borrowings and 1.50% for SOFR term rate borrowings, and (ii) for CapEx Loans, 1.00% for base rate borrowings and 2.00% for SOFR term rate borrowings. The New Credit Facility matures on June 26, 2028 (the “Maturity Date”).
The Borrower may voluntarily prepay loans under the New Credit Facility, in whole or in part, without premium or penalty. Subject to the terms and conditions set forth in the Credit Agreement, the Borrower may be required to make certain mandatory prepayments prior to the Maturity Date.
The Credit Agreement contains negative covenants that, among other things, limit the Borrower's ability to: incur indebtedness; grant liens on its assets; enter into certain investments; consummate fundamental change transactions; engage in mergers or acquisitions or dispose of assets; enter into certain transactions with affiliates; make changes to its fiscal year; enter into certain restrictive agreements; and make certain restricted payments (including for dividends). Each of these limitations are subject to various conditions. The Credit Agreement also contains a springing fixed charge coverage ratio financial covenant that is tested if the amount of the Revolving Loans available for the Borrower to borrow under the New Credit Facility is less than 10% of the total revolving credit facility.
The Credit Agreement also contains certain affirmative covenants and customary events of default provisions, including, subject to thresholds and grace periods, among others, payment default, covenant default, cross default to other material indebtedness, and judgment default.
