TESSCO Technologies entered into a credit agreement that provides for a senior asset-based revolving credit facility of up to $35 million. The facility matures in five years, on June 24, 2021 and includes a $5.0 million sublimit for the issuance of standby letters of credit and a $10.0 million sublimit for swingline loans. The credit agreement also includes a provision permitting the company, subject to certain conditions and approval of the lenders, to increase the aggregate amount of the commitments under the revolving credit facility to an aggregate commitment amount of up to $50 million with optional additional commitments from existing lenders or new commitments from additional lenders, although no Lender is obligated to increase its commitment. Availability is determined in accordance with a borrowing base, which is generally 85% of Eligible Receivables minus Reserves. At present, the full $35 million commitment amount is available.
According to an 8-K filing with the SEC, SunTrust is the administrative agent for the facility.
Borrowings initially accrue interest from the applicable borrowing date at an Applicable Rate equal to the Eurodollar Rate plus the Applicable Margin. The Eurodollar Rate is equal to the One Month LIBOR Index Rate as adjusted to reflect reserve percentages to which the Administrative Agent is subject under applicable Federal Reserve System regulations. When the Applicable Rate is the Eurodollar Rate plus the Applicable Margin, the Applicable Margin is 1.50% if Average Excess Availability is greater than or equal to 50%, and 1.75% otherwise. Under certain circumstances, the Applicable Rate is subject to change at the Lenders’ option from the Eurodollar Rate plus the Applicable Margin to the Base Rate plus the Applicable Margin. Base Rate is the highest from time to time of the prime lending rate announced by the Administrative Agent, the Federal Funds Rate plus 0.50%, and the Eurodollar Rate plus 1.00%. When the Applicable Rate is the Base Rate plus the Applicable Margin, the Applicable Margin is 0.25% if Average Excess Availability is greater than or equal to 50%, and 0.50% otherwise. In any event, following an Event of Default, in addition to changing the Applicable Rate to the Base Rate plus the Applicable Margin, the Lenders’ may at their option set the Applicable Margin at 0.50% if the Base Rate applies or 1.75% if the Eurodollar Rate applies, and increase the Applicable Rate by an additional 200 basis points. The Applicable Rate adjusts on the first business day of each calendar month. The Company is required to pay a monthly Commitment Fee on the average daily unused portion of the Revolving Credit Facility, at a per annum rate equal to .25%.
Borrowings under the Revolving Credit Facility may be used for working capital and other general corporate purposes, and as further provided in, and subject to the applicable terms of, the Credit Agreement.
The Company is required to prepay the balance outstanding on the Revolving Credit Facility under certain circumstances, including from net cash proceeds from certain asset dispositions in excess of certain thresholds.