Debt | 3 Months Ended |
Mar. 31, 2014 |
Debt Disclosure [Abstract] | ' |
Debt | ' |
The following table is a summary of our debt outstanding (in thousands): |
|
| | | | | | | | |
Short-Term Debt Instrument | Interest Rate | Maturity Date | March 31, 2014 | December 31, 2013 |
U.K. short term borrowing | Variable | Annual renewal | $ | 6,958 | | $ | 7,802 | |
|
| | | | |
Long-Term Debt Instrument Classified as Current at March 31, 2014 | Interest Rate | Maturity Date | March 31, 2014 | December 31, 2013 |
Term Loan | Variable | May 21, 2020 | $ | 248,123 | | $ | 248,750 | |
|
ABL Facility | Variable | May 21, 2018 | 35,294 | | 15,635 | |
|
Note payable - PBGC | 4.50% | December 31, 2015 | 600 | | 900 | |
|
Capitalized leases | Various Fixed | | 107 | | 171 | |
|
Total Long-Term Debt | | | 284,124 | | 265,456 | |
|
Less: Current Portion | | | (284,124 | ) | (2,972 | ) |
Long-Term Debt | | | $ | — | | $ | 262,484 | |
|
Term Loan Credit Agreement |
The Term Loan, completed on May 21, 2013, refinanced the $150.0 million term loan facility (the “Old Term Loan”) and was syndicated by Deutsche Bank AG as administrative agent for the syndicated lenders. The principal amount of the Term Loan is $250.0 million, and it has a maturity date of May 21, 2020. Anchor Hocking and Oneida are co-borrowers under the Term Loan. The Term Loan is guaranteed by Universal and its domestic subsidiaries. The Term Loan is secured on first-priority basis by the assets of Universal and its domestic subsidiaries, other than with respect to the assets securing the ABL Facility, which secure the Term Loan facility on a second-priority basis. Principal amortization is payable in consecutive quarterly installments beginning September 30, 2013, in the amount of 0.25% of the amount of the Term Loan outstanding on the Term Loan closing date until maturity. The borrowers are also obligated to make mandatory prepayments upon the occurrence of certain events, including additional debt issuances, common and preferred stock issuances, certain asset sales, and excess cash flow generation. The Term Loan Agreement permits the borrowers to raise one or more incremental term loan facilities in an aggregate amount of up to $50.0 million if the consolidated first lien net leverage ratio, after giving effect to such incremental term loan facility, does not exceed 3.50:1.00, subject to certain other limitations and conditions. |
At the borrowers’ option, borrowings under the Term Loan bear interest at either: (i) Eurodollar Rate or (ii) the Base Rate (which means for any day, a rate per annum equal to the greatest of: (a) the Prime Rate in effect on such day, and (b) the Federal Funds Effective Rate in effect on such day plus 0.50%, and (c) the Eurodollar Rate for a one month interest period plus 1.00%; provided that the Base Rate will be deemed to be no less than 2.25%). The Term Loan has a Eurodollar Rate floor of 1.25%. For Eurodollar Rate and Base Rate borrowings, the applicable interest rate margin is a fixed 6.25% and 5.25%, respectively. In connection with the refinancing of the Term Loan, we capitalized deferred financing fees of $8.6 million and wrote off $6.2 million associated with the refinanced Old Term Loan. As of March 31, 2014, approximately $7.6 million in deferred fees relating to our term loan were being amortized over the remaining life of the agreement. |
Asset-Based Revolving Credit Facility |
The second amendment and restatement of our ABL Facility, completed on May 21, 2013, provides borrowings for general corporate purposes having a maximum initial commitment of $50.0 million and a $20.0 million sub-limit for letters of credit and a swing line sub-limit equal to the greater of $5.0 million or 10% of the maximum credit. The facility matures on May 21, 2018. The borrower may request an increase in the commitment under the ABL Facility up to an additional $25.0 million in the aggregate, at the discretion of the lenders and subject to borrowing base limitations under the ABL Facility. On October 28, 2013, the borrowers were granted an increase of the maximum commitment under the ABL Facility by $5.0 million to a total of $55.0 million. Availability under the ABL Facility is subject to an asset-based borrowing formula based on eligible accounts receivable and inventory. At March 31, 2014, we had excess availability under the ABL Facility of $9.6 million to be drawn upon as needed (which includes a reduction of $10.1 million for outstanding standby letters of credit) with a blended interest rate of 2.24%. The ABL Facility is guaranteed by Universal and its domestic subsidiaries. The ABL Facility is secured on a first-priority basis by certain current assets, such as accounts receivable, inventory, cash, securities, deposit accounts, and securities accounts. |
Borrowings under the ABL Facility bear interest at either: (i) LIBO Rate or (ii) the Base Rate (which means for any day, a rate per annum equal to the greater of: (a) the Prime Rate in effect on such day, and (b) the Federal Funds Effective Rate in effect on such day plus 0.50%, and (c) the LIBO Rate plus 1.00%). In addition, the facilities have applicable interest rate margins. For LIBO Rate and Base Rate borrowings, the margin is determined according to an availability matrix. The margin at March 31, 2014, was 2.00% and 1.00% for LIBO and Base Rate, respectively. In connection with amending and restating the ABL revolving credit facility (the “Old ABL Facility”), which had a maximum availability of $85.0 million, we capitalized deferred financing fees of $0.2 million and wrote off $0.3 million. As of March 31, 2014, approximately $1.2 million in deferred fees relating to the ABL Facility were being amortized over the remaining life of the agreement. |
On May 14, 2014, we amended the ABL Facility to include a larger percentage of suppressed borrowing base assets in the determination of adjusted availability from May 13, 2014 through May 30, 2014. This amendment will allow us to borrow up to an additional $4.125 million under our ABL Facility during this period without triggering the requirement to satisfy the the fixed charge ratio covenant under the ABL Facility. |
Terms, Covenants and Compliance Status |
The ABL Facility and Term Loan each contain customary operating and financial conditions and covenants, including but not limited to restrictions on additional indebtedness, mergers and acquisitions, liens, investments, issuances of capital stock, and dividends. In addition, the Term Loan requires that a maximum leverage ratio and minimum interest coverage ratio be maintained. The ABL Facility requires that a certain minimum fixed charge coverage ratio be maintained if adjusted availability (as defined under the agreement) is below 12.5% of the Maximum Revolver Amount, or $6.9 million, at March 31, 2014. At March 31, 2014, the fixed charge coverage ratio covenant under the ABL Facility was not operative as availability was greater than $6.9 million. Failure to satisfy any of the covenants could result in an event of default that could result in an inability to access the funds necessary to fund our operations. |
We are currently in default of the consolidated leverage ratio and the consolidated interest coverage ratio covenants under the Term Loan Agreement for the fiscal quarter ended March 31, 2014. As discussed in Note 1, the Term Loan Agreement allows us to “cure” such covenant violations if we make a “Cure Contribution” by the date that is 10 business days after the date on which financial statements are required to be delivered with respect to such fiscal quarter. |
On March 31, 2014, the Monomoy Funds provided us with an equity commitment letter pursuant to which the Monomoy Funds committed to offer to purchase securities (which may include preferred stock, convertible preferred stock, debt or convertible debt) from us having an aggregate purchase price in an amount sufficient to fund a Cure Contribution, but no more than $12.0 million in the aggregate, which amount will be reduced by the amount of any other equity raised to fund a Cure Contribution. Subsequent to March 31, 2014, we determined that the $12.0 million maximum commitment contemplated by the equity commitment letter would be insufficient to “cure” the covenant violations for the quarter ended March 31, 2014. We have determined that the amount needed to successfully make a Cure Contribution for the quarter ended March 31, 2014, is approximately $18.7 million. The amount required for a Cure Contribution for the quarter ended March 31, 2014, is higher than originally estimated primarily because Consolidated EBITDA (calculated on a basis consistent with the Term Loan) at March 31, 2014, was lower than originally estimated. The increase in the amount of equity required to “cure” the default is primarily due to the decision to extend the shutdown period of one of our glass furnaces at least through the end of 2014, which resulted in changes to management’s assumptions used in certain adjustments to the calculation of Consolidated EBITDA, and, to a lesser extent, management’s determination, after discussion and review with the Company’s external advisors, that certain changes to the calculation of Consolidated EBITDA were required under the Term Loan Agreement. Additionally, actual EBITDA (which forms the basis for the initial measurement of Consolidated EBITDA) was lower than anticipated due to weaker than expected operational performance during the quarter ended March 31, 2014. In addition, we currently do not anticipate that we will be in compliance with the Term Loan leverage and interest coverage ratio covenants for the balance of 2014. The amount of any equity contributions needed in subsequent quarters to “cure” the anticipated financial covenant defaults would be dependent upon the results of operations in those quarters. Because the maximum commitment by the Monomoy Funds would be insufficient to cure the breach for the quarter ended March 31, 2014 and because we anticipate that we will not be in compliance for the remainder of 2014, we are pursuing a waiver, forbearance or amendment from our lenders, as well as exploring potential sources of debt and equity financing. The board of directors formed a special committee comprised of certain independent directors unaffiliated with the Monomoy Funds to assist the board of directors in seeking a waiver or forbearance of the existing covenant breaches and an amendment to the Term Loan Agreement, as well as evaluating the Company’s alternatives with respect to equity and debt financing. The special committee has retained Jefferies LLC and Schulte, Roth and Zabel LLP to assist it in reviewing these alternatives. If we do not obtain a waiver or forbearance and an amendment from our lenders or equity contributions sufficient to utilize the equity “cure” provision in the Term Loan, the Term Loan Agreement will become subject to acceleration by the lenders. There is therefore substantial doubt regarding our ability to continue as a going concern. |
If we are not able to cure the violation under the Term Loan Agreement by obtaining an amendment to, forbearance of or waiver under the Term Loan Agreement, or obtain other sources of debt financing and/or proceeds from the sale of equity sufficient to enable us to make a Cure Contribution, it will result in an uncured default under the Term Loan Agreement. If this default under the Term Loan Agreement is not cured or waived, the indebtedness under the Term Loan Agreement could be declared immediately due and payable and, upon acceleration of the outstanding indebtedness under the Term Loan, we would be in default under our ABL Facility and our U.K. Revolver and we would be precluded from borrowing under our ABL Facility and U.K. Revolver, which would have a material adverse effect on our business, financial condition and liquidity. There is no assurance that we will be able to obtain an amendment to, forbearance of or waiver under the Term Loan Agreement, or obtain other sources of debt financing and or equity contribution. As a result, there is substantial doubt regarding our ability to continue as a going concern. Even if we are able to obtain an amendment, forbearance agreement or waiver, we may be required to agree to other changes in the Term Loan Agreement, including increased interest rates or premiums, more restrictive covenants and/or pay a fee for such amendment, forbearance agreement or waiver. |
The condensed consolidated financial statements have been prepared on a going concern basis. The going concern basis of presentation assumes that we will continue in operation for the foreseeable future and be able to realize our assets and discharge our liabilities and commitments in the ordinary course of business. Our continuation as a going concern is dependent upon our ability to obtain a waiver or forbearance of the defaults under our Term Loan Agreement and to amend the Term Loan Agreement. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of the carrying amounts of assets or the amount and classification of liabilities that might result if we are unable to continue as a going concern. |
Prior Credit Facilities |
On March 23, 2012, in connection with the Anchor Merger, Universal refinanced substantially all of the existing long term debt obligations of Anchor Hocking and Oneida into the Old Term Loan and amended and restated the Old ABL Facility. We terminated the Old ABL Facility and repaid the Old Term Loan on May 21, 2013, in connection with the Business Combination. |
PBGC Promissory Note |
On September 15, 2006, Oneida issued a $3.0 million promissory note to the Pension Benefit Guaranty Corporation payable in equal installments annually over 10 years. As of March 31, 2014, approximately $0.6 million was outstanding on the promissory note. Interest with respect to the promissory note is paid annually at a rate of 4.5%. The promissory note matures on December 31, 2015. |
U.K. Short Term Borrowing |
We maintain a borrowing facility to support working capital requirements at our United Kingdom subsidiary operations. Subsequent to September 30, 2013, we refinanced the existing Barclays Bank Sterling-denominated borrowing facility with Burdale Bank, an affiliate of our U.S. lender, Wells Fargo (the “U.K. Revolver”). The U.K. Revolver has a £7.0 million maximum collateral commitment based on eligible inventory and accounts receivable at our United Kingdom subsidiary. The Burdale Bank facility matures on October 15, 2015. Among other events of default listed therein, any event of default under the ABL Facility would result in an event of default under the U.K. Revolver. Any event of default under the U.K. Revolver would preclude us from borrowing under the U.K. Revolver or cause an acceleration of the amounts outstanding thereunder, among other remedies listed therein. |