| | Item 1.01 | Entry into a Material Definitive Agreement |
On August 24, 2018, Williams-Sonoma, Inc. (the “Company”) amended its Reimbursement Agreements, dated as of August 30, 2013, and as previously amended on August 29, 2014, August 28, 2015, August 26, 2016 and August 25, 2017, with each of Bank of America, N.A., Wells Fargo Bank, N.A. and U.S. Bank National Association (collectively, the “Banks”), to extend the maturity dates of the agreements. These Reimbursement Agreements allow the Company and its subsidiary, Williams-Sonoma Singapore Pte. Ltd. (the “Singapore Subsidiary”), to request the Banks to issue letters of credit on the Company’s behalf, the Singapore Subsidiary’s behalf or on behalf of any of its subsidiaries until the maturity of the agreements on August 24, 2019. The latest expiration possible for any future letters of credit issued under the facilities is now January 21, 2020. The aggregate credit available under the facilities remains at $70,000,000. The Company also has a $500,000,000 unsecured revolving line of credit and a $300,000,000 unsecured term loan facility with Bank of America, N.A., Wells Fargo Bank, N.A. and U.S. Bank National Association, among others. As of August 24, 2018, there was $5,803,000 of issued letters of credit outstanding under the facilities.
The letter of credit facilities contain certain restrictive loan covenants that are consistent with the Company’s unsecured revolving line of credit, including, among others, a financial covenant requiring a maximum leverage ratio (funded debt adjusted for lease and rent expense to earnings before interest, income tax, depreciation, amortization and rent expense “EBITDAR”) of 3.5 to 1.0, and covenants limiting the Company’s ability to dispose of assets, make acquisitions, be acquired (if a default would result from the acquisition), incur indebtedness, grant liens and make investments. The Company’s obligations under the letter of credit facilities are guaranteed by certain of the Company’s U.S. subsidiaries. The Singapore Subsidiary’s obligations under the letter of credit facilities are guaranteed by the Company.
The letter of credit facilities also contain events of default that include, among others,non-payment of drawings under letters of credit or fees, violation of covenants, inaccuracy of representations and warranties, bankruptcy and insolvency events, material judgments, cross defaults to material indebtedness and events constituting a change of control. The occurrence of an event of default will result in the imposition of interest on unreimbursed amounts at the lender’s prime rate (or if greater, the average rate on overnight federal funds plusone-half of one percent) plus 2.0%, and could result in the acceleration of the Company’s obligations under the letter of credit facilities, an obligation of the Company to deposit with the Banks as collateral an amount equal to all outstanding letters of credit, and an obligation of any or all of the Company’s subsidiaries that have guaranteed the letter of credit facilities to pay the full amount of the Company’s obligations under the letter of credit facilities.
| | Item 2.03 | Creation of a Direct Financial Obligation or an Obligation Under anOff-Balance Sheet Arrangement of a Registrant |
The disclosure set forth under Item 1.01 of this Current Report is incorporated by reference herein.
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