Debt

3 Months Ended

Aug. 30, 2020

Long-term debt, net consists of the following:


(In thousands)	August 30, 2020		May 31, 2020
Term loan	$	106,000	$	114,000
Total principal amount of long-term debt	106,000		114,000
Less: unamortized debt issuance costs	(1,054)		(1,083)
Total long-term debt, net of unamortized debt issuance costs	104,946		112,917
Less: current portion of long-term debt, net	(11,027)		(11,554)
Long-term debt, net	$	93,919	$	101,363

On September 23, 2016, the Company entered into a Credit Agreement with JPMorgan, BMO, and City National Bank, as lenders (collectively, the “Lenders”), and JPMorgan as administrative agent, pursuant to which the Lenders provided the Company with a $100.0 million revolving line of credit (the “Revolver”) and a $50.0 million term loan facility (the “Term Loan”), guaranteed by each of the Company’s direct and indirect subsidiaries and secured by substantially all of the Company’s assets, with the exception of the Company’s investment in Windset.

On November 30, 2018, the Company entered into the Fourth Amendment to the Credit Agreement, which increased the Term Loan to $100.0 million and the Revolver to $105.0 million.

On October 25, 2019, the Company entered into the Sixth Amendment to the Credit Agreement, which increased the Term Loan to $120.0 million and decreased the revolver to $100.0 million.

On March 19, 2020, the Company entered into the Seventh Amendment to the Credit Agreement (the "Seventh Amendment"), which among other changes, retroactively increased the maximum Total Leverage Ratio (as defined in the Credit Agreement as the ratio of the Company’s total indebtedness on such date to the Company’s consolidated EBITDA for the period of four consecutive fiscal quarters ended on or most recently prior to such date) to 5.75 to 1.00 for the fiscal quarter ended February 23, 2020, which decreases back to 5.00 to 1.00 for the fiscal quarter ending May 31, 2020. The maximum Total Leverage Ratio thereafter decreases by 25 basis points each subsequent fiscal quarter thereafter, until it reaches 3.50 for the fiscal quarter ending November 28, 2021, and then remains fixed through maturity. The Seventh Amendment also introduced additional financial covenants that remain in effect through May 31, 2020, including minimum cumulative monthly Unadjusted EBITDA thresholds and maximum capital expenditures, as well as additional reporting requirements and frequencies. Interest on both the Revolver and the Term Loan continued to be based upon the Company’s Total Leverage Ratio, at a per annum rate of either (i) the prime rate plus a spread of between 0.25% and 3.00% or (ii) the Eurodollar rate plus a spread of between 1.25% and 4.00%. The Seventh Amendment also provided for the acceleration of the maturity of the Term Loan from October 25, 2022 to September 23, 2021 if the Company fails to be in compliance with certain financial covenants.

On July 15, 2020, the Company entered into the Eighth Amendment to the Credit Agreement (the “Eighth Amendment”), which among other things, (i) modified the definition of EBITDA to increase the limit on permitted exclusions for certain unusual, extraordinary or one-time cash items for each fiscal quarter ending on or after February 28, 2021, to a maximum of 20% of EBITDA, and (ii) restricted the Company from making Capital Expenditures over certain thresholds. Interest continues to be based on the Company’s Total Leverage Ratio, now at a revised per annum Applicable Rate of either (i) the prime rate plus a spread of between 0.75% and 3.50% or (ii) the Eurodollar rate plus a spread of between 1.75% and 4.50%, plus, in each case, a commitment fee, as applicable, of between 0.15% and 0.55%, as further described in the Eighth Amendment.

The Credit Agreement provides the Company the right to increase the Revolver commitments and/or the Term Loan commitments by obtaining additional commitments either from one or more of the Lenders or another lending institution at an amount of up to $10.0 million.

Both the Revolver and the Term Loan mature on September 23, 2021, with the Term Loan requiring quarterly principal payments of $3.0 million and the remainder continuing to be due at maturity. The Credit Agreement contains customary financial covenants and events of default under which the obligation could be accelerated and/or the interest rate increased. As of August 30, 2020, the Company was in compliance with all financial covenants and events of default provisions under the Credit Agreement.

As of August 30, 2020, $69.0 million was outstanding on the Revolver, at an interest rate of 4.66%.

The Company's outstanding indebtedness under the Credit Agreement will mature and become due on September 23, 2021. The Company's currently available liquidity plus the expected additional cash generated by operations prior to that maturity date are not expected to be sufficient to pay such debt obligations prior to or at the maturity date without additional financing. Management is actively pursuing refinancing options and is currently in discussions with several third-party lenders to seek to negotiate a refinancing that would extend the maturity of the Company’s indebtedness and provide greater flexibility for the Company. Management believes its current refinancing plans are probable to occur and appropriately mitigate the risk that the Company will not be able to meet its obligations as they become due. Therefore, the financial statements have been prepared assuming the Company will continue as a going concern. The Company believes that its cash from operations, along with existing cash and cash equivalents, will be sufficient to finance its operational and capital requirements for at least the next twelve months, assuming the Company is able to execute its plan to refinance its debt. However, there is no guarantee we will able to refinance, or be able to do so on favorable terms. See Item 1A. “Risk Factors” for more information.

Derivative Instruments

On November 1, 2016, the Company entered into an interest rate swap contract (the “2016 Swap”) with BMO at a notional amount of $50.0 million. The 2016 Swap has the effect of changing the Company’s Term Loan obligation from a variable interest rate to a fixed 30-day LIBOR rate of 1.22%.

On June 25, 2018, the Company entered into an interest rate swap contract (the “2018 Swap”) with BMO at a notional amount of $30.0 million. The 2018 Swap has the effect of converting the first $30.0 million of the total outstanding amount of the Company’s 30-day LIBOR borrowings from a variable interest rate to a fixed 30-day LIBOR rate of 2.74%.

On December 2, 2019, the Company entered into an interest rate swap contract (the "2019 Swap") with BMO at a notional amount of $110.0 million which decreases quarterly. The 2019 Swap has the effect of converting primarily all of the $110.0 million of the total outstanding amount of the Company's 30-day LIBOR borrowings from a variable interest rate to a fixed 30-day LIBOR rate of 1.526%.