Item 1.01. Entry into a Material Definitive Agreement.
On December 20, 2022, Guess?, Inc. (the “Company”) entered into an Amended and Restated Loan, Guaranty and Security Agreement (the “Loan Agreement”) by and among the Company, Guess? Retail, Inc., Guess.com, Inc. (collectively, the “U.S. Borrowers”), Guess? Canada Corporation (“Canadian Borrower” and together with the U.S. Borrowers, the “Borrowers”), the guarantors party thereto (the “Guarantors”), the financial institutions from time-to-time party thereto as lenders (the “Lenders”), and Bank of America, N.A., as agent for the Lenders (“Agent”), which amends and restates that certain Loan, Guaranty and Security Agreement, dated as of June 23, 2015, as amended by that certain Amendment Number One to Loan, Guaranty and Security Agreement, dated as of February 16, 2016, that certain Amendment Number Two to Loan, Guaranty and Security Agreement, dated as of April 22, 2019, and that certain Amendment Number Three to Loan, Guaranty and Security Agreement, dated as of April 21, 2020, by and among the Borrowers, the Guarantors, the Lenders and Agent (as so amended, the “Existing Loan Agreement”).
The Loan Agreement amends and extends the maturity of the existing credit facility under the Existing Loan Agreement and provides a senior secured asset-based revolving credit facility that has a maturity date of December 20, 2027, subject to earlier maturity as of 60 days before the maturity date of the Company’s outstanding convertible notes if the notes have not been refinanced or converted into equity by that date and arrangements satisfactory to the Lenders for the refinancing or conversion of the notes have not been made. At closing, there were no direct borrowings and approximately $9.6 million of letters of credit outstanding under the Loan Agreement.
The Loan Agreement provides for borrowing capacity in an amount of up to $150 million, including a Canadian sub-facility of up to $20 million, and a borrowing base that is computed quarterly, monthly or weekly, as applicable, and is composed of the Borrowers’ accounts receivable, inventory and eligible cash, subject to certain reserves. Under the Loan Agreement, the Borrowers have an option to expand the revolving credit facility by up to $150 million in the aggregate subject to the terms and conditions of the Loan Agreement, including the willingness of existing or new lenders to assume such increased amount. The revolving credit facility includes a $35 million sublimit for U.S. letters of credit and a $15 million sublimit for Canadian letters of credit and also includes a U.S. swingline sub-facility of up to $10 million and a Canadian swingline sub-facility of up to $5 million.
The Borrowers may voluntarily reduce or terminate the revolver commitments and prepay outstanding loans under the Loan Agreement, in whole or in part, at any time, subject to customary administrative provisions.
The revolving credit facility may be used to repay debt and for working capital and other general corporate purposes. The revolving credit facility bears interest based on the daily balance outstanding, for loans to the U.S. Borrowers, at the U.S. base rate plus an applicable margin (varying from 0.25% to 0.75%) or at Term SOFR plus a spread adjustment plus an applicable margin (varying from 1.25% to 1.75%), provided that Term SOFR may not be less than zero, or, for loans to the Canadian Borrower, at the Canadian prime rate plus an applicable margin (varying from 0.25% to 0.75%) or at the Canadian BA rate plus an applicable margin (varying from 1.25% to 1.75%), provided that the Canadian BA rate may not be less than zero. The applicable margins are calculated quarterly and vary based on the average daily availability of the aggregate borrowing base as set forth in the Loan Agreement. The U.S. base rate is based on the greater of (i) the U.S. prime rate, (ii) the federal funds rate, plus 0.50%, and (iii) Term SOFR plus a spread adjustment for a 30 day interest period, plus 1.0%, provided that the U.S. base rate may not be less than zero; and the Canadian prime rate is based on the greater of (i) the Canadian prime rate, and (ii) the Canadian BA rate for a one month interest period, plus 1.0%, provided that the Canadian prime rate may not be less than zero. The revolving credit facility also carries a commitment fee equal to the available but unused borrowings at 0.20% per annum.
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