| Item 1.01. | Entry into a Material Definitive Agreement. |
On December 13, 2018, Luby’s, Inc. (the “Company”) entered into a credit agreement (the “Credit Agreement”) among the Company, the lenders from time to time party thereto, and MSD PCOF Partners VI, LLC (“MSD”), as Administrative Agent, pursuant to which the lenders party thereto agreed to make loans to the Company from time to time up to an aggregate principal amount of $80 million, consisting of a $10 million revolving credit facility (the “Revolving Credit Facility”), a $10 million delayed draw term loan (“Delayed Draw Term Loan”), and a $60 million term loan (the “Closing Date Term Loan”, and together with the Revolving Credit Facility and the Delayed Draw Term Loan, collectively, the “Credit Facility”). The Credit terminates on, and all amounts owing thereunder must be repaid on, December 13, 2023.
Borrowings under the Revolving Credit Facility, Delayed Draw Term Loan, and Closing Date Term Loan will bear interest at the London InterBank Offered Rate plus 7.75% per annum. Interest is payable quarterly and accrues daily.
The Credit Facility is subject to the following amortization payments: 1st anniversary: $10 million; 2nd anniversary: $10 million; 3rd anniversary: $15 million; and 4th anniversary: $15 million.
The Company also pays a quarterly commitment fee based on the unused portion of the Revolving Credit Facility and the Delayed Draw Term Loan at 0.50% per annum. Voluntary prepayments under the Delayed Draw Term Loan and the Closing Date Term Loan are subject to a make whole premium during years one and two, a 2% fee during year three, and a 1% fee during year four. Finally, the Company is obligated to pay to the lenders aone-time fee in connection with the closing of the Credit Facility.
Indebtedness under the Credit Facility is secured by a security interest in, among other things, all of the Company’s present and future personal property (other than certain excluded assets), all of the personal property of its guarantors (other than certain excluded assets) and all Mortgaged Property (as defined in the Credit Agreement) of the Company and its subsidiaries.
The Credit Facility contains customary covenants and restrictions on the Company’s ability to engage in certain activities, including financial performance covenants, asset sales and acquisitions, and contains customary events of default. Specifically, among other things, the Company is required to maintain minimum Liquidity (as defined in the Credit Agreement) of $3,000,000 as of the last day of each fiscal quarter and a minimum Asset Coverage Ratio (as defined in the Credit Agreement) of 2.50 to 1.00. As of December 13, 2018, the Company was in full compliance with all covenants with respect to the Credit Facility.
All amounts owing by the Company under the Credit Facility are guaranteed by the subsidiaries of the Company.
The foregoing description of the Credit Agreement is not complete and is qualified in its entirety by reference to the full text of the Credit Agreement, a copy of which is filed herewith as Exhibit 10.1 to this Current Report onForm 8-K and is incorporated herein by reference.
| Item 1.02. | Termination of a Material Definitive Agreement. |
The Credit Facility replaces the Company’s existing revolving credit facility (the “Prior Credit Facility”), pursuant to that certain Credit Agreement, dated as of November 8, 2016 (as amended, restated, or otherwise modified from time to time), by and among the Company, the other credit parties party thereto, the lenders party thereto from time to time, and Wells Fargo Bank, National Association, as administrative agent thereunder. The Prior Credit Facility was terminated on December 13, 2018 in connection with the Company’s entry into the Credit Agreement.
| Item 2.03. | Creation of a Direct Financial Obligation or an Obligation under anOff-Balance Sheet Arrangement of a Registrant. |
The information included in Item 1.01 above regarding the Credit Agreement is incorporated by reference into this Item 2.03.
