| Item 1.01 | Entry into a Material Definitive Agreement |
On December 19, 2019, Armstrong Flooring, Inc. (the “Company”) entered into a Second Amendment to Credit Agreement, dated as of December 18, 2019 (the “Amendment”), by and among the Company, as borrower, the guarantors named therein, the lenders party thereto and Bank of America, N.A., as administrative agent, collateral agent, L/C issuer and swingline lender (the “Agent”).
The Amendment amends that certain Credit Agreement, dated as of December 31, 2018, by and among the Company, the guarantors named therein, the lenders party thereto and the Agent, in order to, among other things, establish a senior secured asset-based revolving facility of up to $100 million and eliminate the Company’s previous $25 million term loan facility (the “Amended Credit Facility”). The Amended Credit Facility provides for a borrowing base that is derived from the Company’s accounts receivable, inventory, machinery and equipment, subject to certain reserves and other limitations.
Borrowings under the Amended Credit Facility will bear interest at a rate per annum equal to, at the Company’s option, a base rate or a Eurodollar rate equal to the London interbank offered rate (“LIBOR”) for the relevant interest period, plus, in each case, an applicable margin determined in accordance with the provisions of the Amendment. The base rate will be the highest of (a) the federal funds rate plus 0.50%, (b) the prime rate of Bank of America, N.A., and (c) one month LIBOR plus 1.00%. The applicable margin for borrowings under the Amended Credit Facility will be determined based on the Company’s Consolidated Net Leverage Ratio (as defined in the Amendment) and will range from 0.75% to 2.00% with respect to base rate borrowings and 1.75% to 3.00% with respect to Eurodollar rate borrowings. In addition to paying interest on outstanding principal under the Amended Credit Facility, the Company will pay a commitment fee to the lenders under the Amended Credit Facility with respect to the unutilized revolving commitments thereunder at a rate ranging from 0.15% to 0.35% depending on the Company’s Consolidated Net Leverage Ratio.
The Amendment modifies a number of covenants that, among other things, require the Company to provide the Agent with certain information with respect to the Company and the borrowing base and to maintain or otherwise preserve the collateral in favor of the Agent and further restricts the Company’s ability to make acquisitions and modifies restrictions on its ability to repurchase equity.
