| Item 1.01 | Entry into a Material Definitive Agreement. |
Term Loan Agreement
On September 5, 2023, Express, Inc. (the “Company”), Express, LLC (the “Borrower”), an indirect, wholly-owned subsidiary of the Company, and certain other direct or indirect, wholly-owned subsidiaries of the Company (collectively, with the Company, the “Guarantors” and, together with the Borrower, the “Loan Parties”) entered into an asset-based term loan agreement (the “Term Loan Agreement”) with ReStore Capital LLC, as administrative agent, collateral agent and lender, and the other lenders from time to time party thereto.
The Term Loan Agreement provides the Borrower with a $65.0 million “first-in, last-out” term loan (the “FILO Term Loan”). $32.5 million of the FILO Term Loan was funded on September 5, 2023, with the remaining principal amount to be funded on or prior to September 13, 2023, without the need for satisfaction of conditions precedent. The net proceeds of the FILO Term Loan will be used to paydown outstanding borrowings under the ABL Credit Agreement (as defined below), without corresponding commitment reductions.
The FILO Term Loan matures on the earlier of (a) November 26, 2027 and (b) the termination of the commitments under the ABL Facility (as defined below) (the “Maturity Date”). The FILO Term Loan will be repaid in quarterly installments, commencing with the first day of the fiscal quarter beginning on October 29, 2023, in the principal amount of $708,000, and thereafter, on the first day of each fiscal quarter in the principal amount of $1,218,750. All remaining principal amount of the FILO Term Loan, together with all accrued and unpaid interest, is due on the Maturity Date. Voluntary prepayment of the FILO Term Loan is permitted at any time upon proper notice, subject to a prepayment fee prior to the third anniversary of the closing date. Principal amounts repaid or prepaid under the FILO Term Loan may not be reborrowed.
The FILO Term Loan bears interest at a variable rate indexed to the Secured Overnight Financing Rate (SOFR) plus a pricing margin of 10.00% per annum. Interest is payable monthly in arrears and due on the first day of each calendar month.
The Term Loan Agreement requires the Borrower to maintain minimum excess availability of at least the greater of (i) $25 million or (ii) 10% of the sum of (x) the ABL Facility (defined below) loan cap (calculated without giving effect to the pushdown reserve under the Term Loan Agreement) plus (y) the lesser of (A) the outstanding principal balance of the FILO Term Loan and (B) a term loan borrowing base based on specified percentages of eligible inventory and credit card receivables. In addition, the Term Loan Agreement contains customary affirmative and negative covenants, including those which (subject to certain exceptions and dollar thresholds) limit the Loan Parties’ ability to incur additional indebtedness or liens; issue negative pledges or guarantees; make investments or loans; engage in asset sales, mergers, acquisitions; prepay other debt; make distributions, pay dividends or repurchase capital stock; engage in transactions with affiliates; and engage in any line of business not related to their current line of business.
The Term Loan Agreement also includes customary events of default that include, among other things, non-payment defaults, inaccuracy of representations and warranties, covenant defaults, cross-default to material indebtedness, bankruptcy and insolvency defaults, material judgment defaults, ERISA defaults, structural defaults under the loan documents and a change of control default. The occurrence of an event of default could result in the acceleration of the obligations under the Term Loan Agreement. Under certain circumstances, a default interest rate will apply on any amount payable under the Term Loan Agreement during the existence of an event of default at a per annum rate equal to 3.00% above the otherwise then applicable interest rate.
All obligations under the Term Loan Agreement are guaranteed by the Loan Parties (other than the Borrower) and secured by a second priority lien on substantially all personal property of the Loan Parties, including cash, accounts receivable, and inventory, and share the same collateral as the ABL Credit Facility.
The foregoing description of the terms of the Term Loan Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Term Loan Agreement, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
