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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
September 13, 1994
BROADWAY STORES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-8765 94-0457907
(State or other jurisdiction of (Commission (I.R.S. employer
incorporation or organization) file number) identification no.)
3880 NORTH MISSION ROAD
LOS ANGELES, CALIFORNIA 90031
(Address of principal executive offices, including zip code)
213-227-2000
(Registrant's telephone number, including area code)
The Exhibit Index is located on page 12.
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ITEM 5. OTHER EVENTS
On September 13, 1994, the registrant finalized a two-part program to
enhance its working capital financing involving the private placement of $64
million of Subordinated Credit Card Notes Due 1999 (the "Notes") issued by
Broadway Receivables, Inc. (formerly CHH Receivables, Inc.), the registrant's
wholly-owned special purpose accounts receivable financing subsidiary
("Broadway Receivables"), and the extension of the maturity of the registrant's
$225 revolving credit facility (the "Credit Facility") and $575 million credit
card receivables securitization facility (the "Receivables Facility") from
October 1995 until October 1996. In connection with the issuance of the Notes,
Broadway Receivables also entered into interest rate cap agreements with
certain financial institutions having ratings by Standard & Poor's Corporation
of at least "BBB" in notional amounts aggregating $575 million (the "Interest
Rate Cap Agreements"). The issuance of the Notes and the amendment of the
Receivables Facility documentation described below effectively increases the
maximum advance rate permitted against eligible accounts receivable of the
registrant sold to Broadway Receivables from 88% to approximately 91%.
THE NOTES
The Notes were issued in two classes consisting of $38 million of
7.55% Subordinated Credit Card Notes, Class A, Due 1999 (the "Class A Notes"),
and $26 million of 11% Subordinated Credit Card Notes, Class B, Due 1999 (the
"Class B Notes"). In the event that Broadway Receivables fails to redeem the
Notes in full on or prior to October 8, 1996, the interest rate on the
outstanding Notes will increase by 200 basis points (the amount of such
increase in respect of any Note is hereafter referred to as the "Step-Up
Interest Amount"). Step-Up Interest Amounts will accrue on the Notes monthly
but are not payable until all of Broadway Receivables' obligations in respect
of the Receivables Facility have been paid in full.
The Notes are subordinated in right of payment to certain obligations
of Broadway Receivables under the Receivables Facility, and the Class B Notes
are subordinated in right of payment to the Class A Notes. The Notes are
secured, on a basis subordinate to the Receivables Facility lenders, by the
Receivables, certain related assets, the Interest Rate Cap Agreements and all
proceeds from the foregoing (collectively, the "Collateral"). The Notes are
limited recourse obligations of Broadway Receivables payable solely out of the
Collateral and the proceeds thereof. To the extent that the Collateral and the
proceeds thereof allocable to the holders of the Notes is for any reason
insufficient to provide for the payment of amounts owing
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to such holders, no holder of Notes shall have any recourse against Broadway
Receivables, the registrant or any other person for the amount of such
insufficiency.
The Notes are redeemable at the option of Broadway Receivables, in
whole or in part, on each interest payment date on or after October 15, 1994
and on October 8, 1996, at a redemption price (the "Redemption Price") equal to
the sum of 100% of the principal amount thereof, together with accrued and
unpaid interest thereon and, in the case of any redemption occurring prior to
October 8, 1996, a make-whole premium determined by reference to a discount
rate equal to the sum of (i) the bond equivalent yield to maturity on the 6.25%
U.S. Treasury Note maturing in August 1996, plus (ii) in the case of the Class
A Notes, 110 basis points, and in the case of the Class B Notes, 325 basis
points. Upon the occurrence of certain events ("Early Amortization Events"),
including, among others, the failure of Broadway Receivables to redeem the
Notes in full on or prior to October 8, 1996 or the occurrence of an event of
default with respect to the Notes, all amounts received by the collateral agent
for the Collateral in respect of the Receivables, to the extent not required to
meet current interest on the Notes and the Receivables Facility and certain
other fees and expenses, will be applied to repay principal in respect of
Broadway Receivables' obligations under the Receivables Facility and, upon
payment in full of the obligations of Broadway Receivables under the
Receivables Facility that are senior to the Notes, to make mandatory
redemptions on each interest payment date of principal of the Class A Notes
and, following retirement thereof, the Class B Notes, in each case at the
Redemption Price.
CHANGES IN THE RECEIVABLES FACILITY
In connection with the issuance of the Notes, the Receivables Facility
documentation was amended to extend the maturity of the Receivables Facility
until October 8, 1996, to create subordinated security interests in the
Collateral in favor of the holders of the Notes and to otherwise accommodate
the issuance of the Notes.
Pursuant to the indenture under which the Notes were issued (the
"Indenture") and the Receivables Facility, as amended, the maximum aggregate
principal amount of Broadway Receivables' obligations under the Notes and the
Receivables Facility at any time is limited to an amount (the "Maximum
Permitted Debt") equal to the product of (x) the Maximum Permitted Debt Ratio
at such time and (y) the Outstanding Balance of the Receivables meeting
specified eligibility criteria ("Eligible Receivables") owned by Broadway
Receivables at such time. In addition, pursuant to the Indenture and the
Receivables
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Facility, as amended, (i) the maximum aggregate principal amount of Broadway
Receivables' obligations under the Class A Notes and the Receivables Facility
at any time is limited to an amount (the "Maximum Class A Debt Amount") equal
to the product of (x) the Maximum Class A Debt Ratio at such time and (y) the
Outstanding Balance of the Eligible Receivables owned by Broadway Receivables
at such time and (ii) the maximum aggregate principal amount of Broadway
Receivables' obligations under the Receivables Facility at any time is limited
to an amount equal to the product of (x) 82% and (y) the Outstanding Balance of
the Eligible Receivables owned by Broadway Receivables at such time.
The Maximum Permitted Debt Ratio equals (a)(i) on any day from and
including December 1 to but excluding February 1, 90%, or (ii) on any day from
and including February 1 to but excluding December 1, 91%, minus (b) the sum of
the Yield Discount Factor and the Payment Rate Factor. The Maximum Class A
Debt Ratio equals (a)(i) on any day from and including December 1 to but
excluding February 1, 86%, or (ii) on any day from and including February 1 to
but excluding December 1, 87%, minus (b) the sum of the Yield Discount Factor
and the Payment Rate Factor.
The Receivables Facility was also amended to reduce the program fee,
expressed as a percentage per annum of the average daily aggregate outstanding
amount under the Receivables Facility, from 1.10% to 1.08%. In addition, the
Receivables Facility was amended to provide that (i) any "Event of Default"
under (and as defined in) the Indenture, (ii) any Early Amortization Event or
(iii) any determination or assertion of invalidity or unenforceability of the
Notes would constitute an event of default under the Receivables Facility.
For purposes of the discussion above, the following terms shall have
the indicated meanings.
The term "Calculation Period" means, with respect to any Settlement
Period, the one-month period commencing on the 10th day following the end of
such Settlement Period and ending on the 9th day following the end of the next
succeeding Settlement Period.
The "Net Portfolio Yield" for any Settlement Period is equal to twelve
times the percentage equivalent of a fraction the numerator of which is equal
to (i) the Normalized Finance Charges for such Settlement Period minus (ii) the
Normalized Net Write-Offs during such Settlement Period, and the denominator of
which is equal to the Outstanding Balance of the Receivables on the first day
of such Settlement Period.
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The term "Normalized Collections" means, with respect to any
Settlement Period, the amount obtained by dividing the aggregate collections
received in respect of the Receivables during such Settlement Period by the
number of billing cycles in such Settlement Period and multiplying the quotient
by 36.
The term "Normalized Finance Charges" means, with respect to any
Settlement Period, the amount obtained by dividing the aggregate amount of
collections on the Receivables received in such Settlement Period that are
allocable to finance charges by the number of billing cycles that occurred in
such Settlement Period and multiplying the quotient by 36.
The term "Normalized Net Write-Offs" means, with respect to any
Settlement Period, the amount obtained by dividing the aggregate amount of
Receivables written-off as uncollectible during such Settlement Period net of
the aggregate recoveries received in such Settlement Period by the number of
billing cycles that occurred in such Settlement Period and multiplying the
quotient by 36.
The term "Outstanding Balance" of a Receivable on any day means the
aggregate amount owed by the obligor thereunder on such day.
The term "Payment Rate" shall mean, for any Settlement Period, a
fraction the numerator of which is equal to the Normalized Collections for such
Settlement Period and the denominator of which is the aggregate Outstanding
Balance of the Receivables on the first day of such Settlement Period.
The "Payment Rate Factor" for each day during a Calculation Period
equals (i) if the average Payment Rate for the immediately preceding three
Settlement Periods ending with the related Settlement Period equals or exceeds
13%, 0% and (ii) if the average Payment Rate for the immediately preceding
three Settlement Periods ending with the related Settlement Period is less than
13%, 1.0%.
The term "Receivable" means any receivable purchased by Broadway
Receivables from the registrant pursuant to the terms of the receivables
purchase agreement, which forms a part of the Receivables Facility.
The term "Settlement Period" shall mean, with respect to any
Settlement Date, the preceding fiscal month of the registrant.
The "Yield Discount Factor" means, for each day during a Calculation
Period, the amount, if any, by which (x) an amount
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equal to (i) the weighted average interest rate per annum on the Notes and the
Receivables Facility for the related Settlement Period plus (ii) 2% minus (iii)
twelve times the percentage equivalent of a fraction the numerator of which is
equal to the aggregate amount of any payments received under the Interest Rate
Cap Agreements during such related Settlement Period and the denominator of
which is equal to the average outstanding principal amount of Broadway
Receivables' obligations under the Notes and the Receivables Facility for such
related Settlement Period exceeds (y) the Net Portfolio Yield for such related
Settlement Period.
CHANGES IN THE CREDIT FACILITY
In connection with the issuance of the Notes and the amendment of the
Receivables Facility documentation, the Credit Facility was amended to extend
the maturity of the Credit Facility until October 8, 1996, to provide for
reduced pricing for interest payments payable after February 10, 1995, to alter
certain of the financial covenants, and to make certain other changes in
connection with the issuance of the Notes.
Prior to the issuance of the Notes, amounts outstanding under the
Credit Facility bear interest at a floating rate equal to the "Index Rate"
(determined by reference to certain prime rates or the annualized yield on
directly-placed 90-day commercial paper) plus 1.50% per annum. Under the
Credit Facility as amended, the additional margin over the Index Rate (the
"Applicable Margin") may be reduced with respect to interest payments payable
after February 1995 in the event that the registrant's Fixed Charge Coverage is
greater than 1.25. If the registrant's Fixed Charge Coverage is greater than
1.25 and less than or equal to 1.50, then the Applicable Margin is reduced to
1.25%, and if the registrant's Fixed Charge Coverage is greater than 1.50, then
the Applicable Margin is reduced to 1.00%.
The Credit Facility was also amended to increase the maximum aggregate
face amount of letters of credit available under the Credit Facility from $65
million to $75 million (or, if less, the amount of the Borrowing Base (as
defined in the Credit Facility) less outstanding advances). In addition, the
Credit Facility was amended to provide that (i) any "Event of Default" under
(and as defined in) the Indenture, or (ii) any Early Amortization Event would
constitute an event of default under the Credit Facility.
In connection with the extension of the maturity of the Credit
Facility, the Consolidated EBITDA covenant contained in the Credit Facility was
amended to provide that the registrant
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will not permit aggregated Consolidated EBITDA for the Fiscal Months which
are substantially coextensive with any period set forth below to be less
than the amount set forth below opposite such period:
Fiscal Months Amount
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November 1994 to October 1995 $107,300,000
December 1994 to November 1995 $111,400,000
January 1995 to December 1995 $117,300,000
February 1995 to January 1996
and each twelve-Fiscal-Month
period thereafter $120,600,000
In addition, the Credit Facility's Consolidated Net Cash Flow covenant
was amended to provide that the registrant will not permit Consolidated Net Cash
Flow for the Fiscal Months which are substantially coextensive with any period
set forth below to be less than the amount set forth below opposite such period
(except that any amount set forth below in parentheses shall be the maximum
amount of permitted Consolidated Net Cash Flow deficit for the period of Fiscal
Months set forth opposite such amount):
Fiscal Months Amount
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February 1994 to February 1995 ($29,600,000)
February 1994 to March 1995 ($28,300,000)
February 1994 to April 1995 ($26,500,000)
February 1994 to May 1995 ($21,000,000)
February 1994 to June 1995 ($13,000,000)
February 1994 to July 1995 ($13,200,000)
February 1994 to August 1995 ($12,000,000)
February 1994 to September 1995 ($ 9,700,000)
February 1994 to October 1995 ($10,400,000)
February 1994 to November 1995 ($ 5,200,000)
February 1994 to December 1995 $47,700,000
February 1994 to January 1996 $38,300,000
February 1994 to February 1996 $28,300,000
February 1994 to March 1996 $35,100,000
February 1994 to April 1996 $52,400,000
February 1994 to May 1996 $68,400,000
February 1994 to June 1996 $106,900,000
February 1994 to July 1996 $132,200,000
February 1994 to August 1996 $143,900,000
February 1994 to September 1996 $144,200,000
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Covenant levels for Consolidated EBITDA and Consolidated Net Cash Flow for
periods ending prior to those set forth above were not changed.
The Credit Facility's Capital Expenditure covenant was also amended to
provide that the registrant will not permit the aggregate amount of all Capital
Expenditures of the registrant and its subsidiaries to exceed, during any
period set forth below, the amount set forth below opposite such period:
Period (Fiscal Months)
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Through
From (and Including) Amount
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February 1994 January 1995 $110,000,000
February 1995 January 1996 $106,000,000
February 1996 September 1996 $ 62,000,000
provided, however, that the aggregate amount of Capital Expenditures otherwise
permitted pursuant to the Capital Expenditures covenant in the Credit Facility
during the period from the February 1996 through and including the September
1996 Fiscal Months shall be increased (i) by an amount equal to the lesser of
$20,000,000 or the unused portion of the allowance for Capital Expenditures for
the period from February 1994 through January 1996 and (ii) by an amount equal
to the lesser of $16,000,000 or 75% of the excess, if any, of Consolidated
EBITDA as of the end of any Fiscal Month after February 1994 through January
1996 over the Consolidated EBITDA required to be achieved by the registrant
pursuant to the Consolidated EBITDA covenant in the Credit Facility as of the
end of such Fiscal Month. Notwithstanding anything to the contrary set forth
above, in no event shall the aggregate amount of Capital Expenditures of the
registrant and its subsidiaries exceed $25,000,000 during any Fiscal Month.
In addition to the changes in the financial covenants described above,
in connection with the extension of the maturity of the Credit Facility,
additional percentage limits for the registrant's net inventory ratio were
prescribed for the final year of the Credit Facility's term. The minimum and
maximum levels for the registrant's consolidated inventory balance were also
amended.
For purposes of the discussion above, the following terms shall have
the indicated meanings.
"Accounts" means all accounts, accounts receivable, other receivables,
contract rights, chattel paper, instruments,
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documents and notes, whether now owned or hereafter acquired by the registrant
and whether or not earned by performance.
"Consolidated EBITDA" means for any period the sum of consolidated net
income of the registrant and its subsidiaries for such period plus consolidated
interest charges (including any capitalized interest payable to certain
lenders) plus consolidated taxes deducted in arriving at consolidated net
income plus consolidated non-cash charges (including depreciation, amortization
and LIFO reserve charges) plus extraordinary losses less extraordinary gains.
"Capital Expenditures" means all payments for any fixed assets or
improvements or for replacements, substitutions or addition, thereto, that have
a useful life of more than one year and which are required to be capitalized
under generally accepted accounting principles ("GAAP"), other than capital
lease obligations.
"Consolidated Interest Expense" means for any period total interest
expense of the registrant and its subsidiaries, whether paid or accrued, for
the period, including without limitation (to the extent included in interest
expense) (i) the interest component of payments under Capital Leases (as
defined in the Credit Facility), (ii) all commissions, discounts and other fees
and charges owed with respect to letters of credit and bankers acceptance
financing, (iii) the fees payable under the Credit Facility and the Receivables
Facility (other than capitalized fees the amortization of which is included in
clause (iv) hereof), (iv) amortization of financing fees and expenses which
have been capitalized, (v) amortization of discount premium (if any), (vi) the
interest component of any deferred payment obligation, (vii) net costs (less
net benefits) under interest rate protection agreements and (viii) all other
cash or non-cash interest expenses, in each case as determined in conformity
with GAAP.
"Consolidated Net Cash Flow" means for any period the sum of
consolidated earnings before taxes of the registrant and its subsidiaries for
such period plus consolidated non-cash charges (including depreciation,
amortization and LIFO reserve charges) less principal payments in respect of
capital lease obligations less reductions in the restructuring reserve
liability account less consolidated taxes actually paid less extraordinary
losses plus extraordinary gains, plus all net cash proceeds (after deducting
all fees and expenses, including, without limitation, underwriting and
brokerage commissions, fees and discounts) received by the registrant from the
sale of Common Stock, the registrant's preferred stock or, subject to the prior
written approval of General Electric Capital Corporation,
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unsecured subordinated obligations of the registrant having terms and
conditions satisfactory to General Electric Capital Corporation plus, subject
to the prior written approval of General Electric Capital Corporation, all net
cash proceeds (after deducting all fees and expenses (including, without
limitation, underwriting and brokerage commissions, fees and discounts) from
any sale by the registrant of all or a substantial portion of the registrant's
Accounts on terms and conditions satisfactory to General Electric Capital
Corporation (other than sales of the registrant's Accounts to Broadway
Receivables in accordance with the terms of the Receivables Facility).
"Fixed Charge Coverage" means for the period of twelve consecutive
Fiscal Months ending on the date of determination the ratio of (a) the sum of
(i) Consolidated EBITDA for that period less (ii) consolidated Capital
Expenditures of the registrant and its subsidiaries for that period over (b)
the sum of (i) Consolidated Interest Expense for the registrant and its
subsidiaries for that period, plus (ii) principal payments paid or payable
during that period on all indebtedness (as defined in the Credit Facility and
determined on a consolidated basis) of the registrant and its subsidiaries,
including without limitation Capital Lease Obligations (as defined in the
Credit Facility) and mortgage payments, but excluding payments with respect to
current liabilities arising in the ordinary course of business for the deferred
purchase price of property or services plus (iii) cash payments actually paid
during that period with respect to consolidated tax liabilities of the
registrant and its subsidiaries.
"Fiscal Month" means each of the three four-week or five-week
accounting period comprising a quarterly accounting period with a Fiscal Year.
"Fiscal Year" means a fiscal year of the registrant ending on the
Saturday closest to January 31, unless subsequently changed by the registrant
with the lender's consent.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
See Exhibit Index on Page 12.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
Broadway Stores, Inc.
/s/ MARC E. BERCOON
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Marc E. Bercoon, Senior Vice President,
General Counsel and Secretary
September 23, 1994
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EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
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4.1 Amendment No. 1 to Receivables-Backed Credit Agreement,
dated as of September 28, 1993, among CHH RECEIVABLES, INC.,
BLUE HAWK FUNDING CORPORATION and GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent............................................
4.2 Amendment No. 2 to Receivables-Backed Credit Agreement, dated
as of September 13, 1994, among BROADWAY RECEIVABLES, INC.,
BLUE HAWK FUNDING CORPORATION and GENERAL ELECTRIC CAPITAL
CORPORATION......................................................
4.3 Amended and Restated Assignment and Security Agreement dated
as of September 13, 1994 among BROADWAY RECEIVABLES, INC.,
BLUE HAWK FUNDING CORPORATION, BANKERS TRUST COMPANY, as Trustee
and Cash Collateral Bank, and GENERAL ELECTRIC CAPITAL
CORPORATION......................................................
4.4 Amendment No. 1 to Receivables Purchase Agreement, dated
as of September 13, 1994 by and between BROADWAY RECEIVABLES,
INC. and BROADWAY STORES, INC....................................
4.5 First Amendment, dated as of September 13, 1994, to the
Liquidity Agreement dated as of October 8, 1992 among Blue
Hawk Funding Corporation, the lenders party thereto and
General Electric Capital Corporation, as agent for the
Liquidity Lenders................................................
4.6 First Amendment, dated as of September 13, 1994, to the
Letter of Credit Reimbursement Agreement dated as of
October 8, 1992 among Broadway Receivables, Inc., Blue
Hawk Funding Corporation, the financial institutions
party thereto and General Electric Capital Corporation...........
4.7 Amendment No. 1 to Irrevocable Letter of Credit
No. 1992RFS1.....................................................
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4.8 Indenture dated as of September 1, 1994 between BROADWAY RECEIVABLES,
INC., a Delaware corporation, and BANKERS TRUST COMPANY, a New York
banking corporation, as trustee relating to the Subordinated Credit
Card Notes due 1999..................................................
4.9 Broadway Receivables, Inc. 7.55% Subordinated Credit Card Note,
Class A, Due 1999....................................................
4.10 Broadway Receivables, Inc. 11% Subordinated Credit Card Note,
Class B, Due 1999....................................................
4.11 Seventh Amendment to Credit Agreement, dated as of September 13, 1994
among BROADWAY STORES, INC., a Delaware corporation previously known
as Carter Hawley Hale Stores, Inc., the financial institutions
parties thereto and GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation, as agent for the Lenders................................
20.1 Press Release dated September 13, 1994...............................
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