Debt Obligations

12 Months Ended

Jun. 30, 2020

Debt Obligations

The following table summarizes the Company’s debt obligations:

June 30, 2020

June 30, 2019

(In thousands)

Debt Origination Date

Maturity

Original Borrowing Amount

Carrying Value

Weighted Average Interest Rate

Carrying Value

Weighted Average Interest Rate

Credit Facility

Revolver

11/6/2023

N/A

122,000

4.91

92,000

3.98

In March 2020, pursuant to Amendment No. 2 to Amended and Restated Credit Agreement (the “Second Amendment”) the Company amended its existing senior secured revolving credit facility (such facility as amended to date, including pursuant to the Second Amendment, the “Amended Revolving Facility”) with certain financial institutions. The Second Amendment, among other things: (i) decreased the size of the revolving credit facility to $125.0 million from $150.0 million;(ii) made certain adjustments to the commitment fee rates and interest rates; (iii) increased the maximum total net leverage ratio financial covenant until the quarter ending December 31, 2021; (iv) added a minimum EBITDA financial covenant until the quarter ending December 31, 2021; (v) amended the definitions of “EBITDA” and “Permitted Acquisition”; (vi) removed the accordion feature; (vii) removed the Company’s option to request and agree to an extension of the maturity date with individual lenders; (viii) provided for a mortgage on certain of the Company’s real property; (ix) provides for the revolving commitments to be reduced upon the occurrence of certain asset dispositions and incurrences of other indebtedness; (x) added a monthly reporting requirement; and (xi) modified certain of the Company’s covenant-related baskets.

The Amended Revolving Facility otherwise retained many of its previous terms, including the sublimit on letters of credit and swingline loans of $15.0 million each. The commitment fee is based on a leverage grid and ranges from 0.20% to 0.50%. Borrowings under the Amended Revolving Facility bear interest on base rate loans based on a leverage grid with a range of PRIME + 0.50% to 2.50%, and on Eurodollar loans based on a leverage grid with a range of Adjusted LIBO Rate + 1.50% to 3.50%. Effective March 27, 2019, the Company entered into a rate swap agreement and in December 2019 amended the agreement to reduce the notional amount. The impact of the amendment for the year ended June 30, 2020, was $0.4 million of realized loss due to the partial unwinding of interest rate swap resulting from the amendment of the notional amount from $80.0 million to $65.0 million. See Note 6 for details.

Under the Amended Revolving Facility, the Company is subject to a variety of affirmative and negative covenants of types customary in a senior secured lending facility, including financial covenants relating to leverage, interest expense coverage and (until the quarter ending December 31, 2021) minimum adjusted EBITDA. The Company is allowed to pay dividends, provided, among other things, a total net leverage ratio is met, and no default exists or has occurred and is continuing as of the date of any such payment and after giving effect thereto. The Amended Revolving Facility has no scheduled payback required on the principal prior to the maturity date on November 6, 2023.

At June 30, 2020, the Company had outstanding borrowings of $122.0 million and had utilized $2.3 million of the letters of credit sublimit.

On July 23, 2020 (the "Effective Date"), pursuant to Amendment No. 3 to Amended and Restated Credit Agreement (the “Third Amendment”), the Company amended its existing senior secured revolving credit facility with certain financial institutions.

The Third Amendment, among other things:


(1)	retained the revolving commitments under the Credit Agreement of $125.0 million and the sublimit on letters of credit and swingline loans of $15.0 million each;


(2)	added a $5.0 million quarterly commitment reduction beginning September 30, 2021;


(3)	adjusted from cash flow-based to an asset-based lending structure with borrowing a base of 85% of eligible accounts receivable plus 50% of eligible inventory with certain permitted maximum over advance amounts;


(4)	removed all previous financial covenants of net leverage ratio, interest coverage ratio and minimum EBITDA;


(5)	added a covenant relief period (commencing on the effective date of the Third Amendment and ending upon delivery of a compliance certificate on or after fiscal month ending September 30, 2021), during which the Company must comply with the following:

(i) a minimum cumulative EBITDA covenant, tested on a monthly basis until the last day of June 2021;

(ii) a standalone minimum monthly EBITDA covenant tested on the last day of July 2021 and August 2021; and

(iii) a restriction on capital expenditures such that the amount of capital expenditures shall not exceed $25.0 million in the aggregate.


(6)	added covenant requiring the Company to maintain a minimum liquidity covenant, tested on a weekly basis;


(7)	added an anti-cash hoarding provision;


(8)	added a minimum fixed charge coverage ratio of 1.05:1.00 commencing with fiscal quarter ending September 30, 2021, and tested on a quarterly basis thereafter;


(9)	modified the applicable margin for base rate loans to range from PRIME + 3.50% to PRIME + 4.50% per annum and the applicable margin for Eurodollar loans to range from Adjusted LIBO Rate + 4.50% to Adjusted LIBO Rate + 5.50% per annum and fixed the commitment fee at 0.50%;


(10)	provided for the revolving commitments to be reduced upon the occurrence of certain asset dispositions and incurrence of non-permitted indebtedness and imposed additional restrictions on the Company’s ability to utilize certain other negative covenant baskets; and


(11)	added a requirement to provide mortgages and related mortgage instruments with respect to certain specified real property owned by the Company.

Upon executing the foregoing Third Amendment, the Company was in compliance with all of the financial covenants under the Amended Revolving Facility, and no event of default has occurred or existed through the Third Amendment effective date. Furthermore, the Company believes it will be in compliance with the related financial covenants under the Third Amendment for the next twelve months.