Tandy Brands Accessories provided an update on the results achieved from its restructuring plan announced March 18th and announced the execution of new credit facilities.
On July 24th, the company entered into a new credit agreement with Salus Capital Partners to provide senior financing up to $29 million. The facility is comprised of a revolving credit facility in the amount of $27.5 million, and a term loan facility in the amount of $1.5 million, and expires in July 2015 (the Credit Facility). Under the Credit Facility, borrowings bear interest at either the base rate or LIBOR, plus an additional percentage for each of the revolver and the term loan.
The Credit Facility is secured by a first priority lien on substantially all of the assets of the company and its subsidiaries, excluding certain goods and related accounts receivable financed pursuant to the King Trade Facility (see below), for which Salus will have a second priority lien. The Credit Facility contains covenants which address minimum consolidated EBITDA requirements, account concentration limitations, budgeted expenses and accounts payable to inventory ratios. The Credit Agreement also provides for customary representations, warranties, affirmative covenants, negative covenants and events of default.
The company used the proceeds of the initial advance under the Credit Facility to repay indebtedness owing to Wells Fargo and to pay fees and expenses incurred in connection with the Credit Agreement. The company will use the proceeds of future advances under the Credit Agreement for working capital purposes.
The company entered into a Master Agreement with EPK Financial Corporation, d/b/a King Trade Capital, that provides for a purchase and sale facility (the "King Trade Facility") with $11.5 million of maximum aggregate amount permitted to be outstanding. The King Trade Facility is expected to provide the company with financing to purchase certain inventory related to the Company's holiday 2013 seasonal gifts business.
The King Trade Facility is secured by (i) a first priority lien on the goods and related accounts receivable financed by the Company under the King Trade Facility, and (ii) a second priority lien on substantially all other assets of the company. The amounts payable under the King Trade Facility bear interest at varying rates which depend primarily on the length of time such amounts are outstanding, the amount advanced for each transaction and the aggregate of all amounts advanced.
The Master Agreement contains representations and warranties and covenants that are customary for such financing arrangements.
"We learned some tough lessons in fiscal year 2013. Today we are pleased to announce that we have not only executed our previously announced restructuring plans, but we have also finalized a new capital structure, both of which we expect will improve our competitive and financial position as we begin fiscal 2014," said Rod McGeachy, President and Chief Executive Officer. "Furthermore, I am pleased that we were able to accomplish this with no equity dilution to our current shareholders," continued McGeachy.
Tandy Brands also announced the elimination of the Chief Restructuring Officer (CRO) role. On March 8, 2013, the company appointed John Little from Deloitte Financial Advisory Services LLP as a consultant filling the CRO role and performing the following duties under the CRO engagement:
"John and the CRO role added value to our organization during a difficult time," said McGeachy. "During the past four months we've successfully maintained service to our retailers, executed our restructuring initiatives, and closed our new credit facilities. We thank John for his contributions," said McGeachy.