Hancock Fabrics, Inc. announced the refinancing of the company’s existing senior debt under a new credit agreement with Wells Fargo Capital Finance and Great American Capital Partners. This will provide additional availability over the current senior debt and extends the maturity date of the company’s senior debt to April 22, 2020, subject to a springing maturity provision which could cause the maturity date to be August 22, 2017 if the company’s existing senior notes are not refinanced or repaid before that date and more than $750,000 of the senior notes remains outstanding on such date.
The Wells Fargo facility provides senior secured financing of $117.5 million consisting of (a) an up to $100 million revolving credit facility (the “Revolver”), which includes a letter of credit sub-facility of $15 million, and (b) an up to $17.5 million term loan facility (the “Term Loan”) provided by Great American Capital Partners. The proceeds from the new credit facility were used to extinguish the amounts outstanding under the existing loan agreement and to pay related fees and expenses.
Steve Morgan, President and Chief Executive Officer commented, “We are very excited to partner with a premier banking institution such as Wells Fargo. We have had a long-standing partnership with Great American Group and its affiliates, and we look forward to growing the relationship further. The decision was made to negotiate a credit facility with new lenders a year and a half in advance of the expiration of our current facility, in order to strengthen our long term position. By extending the maturity of our senior secured debt and increasing availability under our Revolver and Term Loan we believe we have enhanced our ability to achieve the inventory productivity and operational improvements we have implemented and continue to drive. Hancock Fabrics is pleased with the strong demonstration of support from the banking and commercial finance community with regard to the strength of our business and strategic outlook. We look forward to growing our relationship with Wells Fargo and working with them as we execute our many on-going initiatives.”
In the first quarter of 2015, the company expects to incur a one-time charge related to the refinancing of approximately $1.4 million, of which approximately $0.9 million represents a non-cash write-off of prior deferred financing costs.
Excluding the one-time charge above, Hancock expects the impact to interest expense to be immaterial for fiscal 2015 and beyond. The increased interest expense from the additional amount available under the Term Loan is partially offset by a reduction in deferred loan costs that would be recognized in interest expense.
Hancock Fabrics, Inc. is committed to being the authority in fabric, sewing and crafts, serving creative enthusiasts with a complete selection of fashion and home decorating textiles, sewing accessories, needlecraft supplies and sewing machines.