Credit Agreements

6 Months Ended

Jul. 30, 2022

Credit Agreements

Credit Agreements

(6)   Credit Agreements

The Company’s long-term credit facilities consist of:

	July 30, 2022		January 29, 2022
Revolving Loan due July 31, 2024, principal amount	$	62,643	$	60,216
8.5% Senior Unsecured Notes, due 2026, principal amount		80,000		80,000
Real Estate Financing term loan due July 31, 2024, principal amount		28,500		28,500
Seller notes:
Seller note due in annual installments, maturing in November 2023, principal amount		18,409		20,062
Seller note due in quarterly installments, maturing in December 2023, principal amount		6,000		8,000
Total seller notes		24,409		28,062
Convertible Debt		3,100		—
Total debt		198,652		196,778
Less: unamortized debt issuance costs		(6,623)		(7,607)
Less: unamortized debt discount		(175)		—
Plus: unamortized debt premium		1,218		1,292
Total carrying amount of debt		193,072		190,463
Less: current portion of long-term debt		(16,595)		(14,031)
Long-term debt, net	$	176,477	$	176,432

Convertible Debt

On April 18, 2022, the Company entered into a securities purchase agreement (with Growth Capital Partners, LLC (“GCP”), for the purchase and sale of an unsecured promissory note (the “GCP Note”) in the original aggregate principal amount of $10,600, which may, at the Company’s discretion, be settled in cash or at a premium into shares of the Company’s common stock, in a private placement upon the terms and subject to the limitations and conditions set forth in the GCP Note. The aggregate purchase price of the GCP Note was $10,000, which reflects an original issue discount of $600. On May 17, 2022, the Company paid off $7,500 of the GCP Note.

The GCP Note accrues interest at 7% per annum, unless an event of default has occurred and is continuing, at which time at the election of the GCP, interest would accrue at a rate equal to the lesser of 18% per annum or the maximum rate permitted under applicable law. The GCP Note is scheduled to mature on May 18, 2023. Beginning six months after the purchase date, GCP will have the right, exercisable at any time in its sole and absolute discretion, to redeem all or any portion of the GCP Note, subject to a maximum monthly redemption amount of $1,500. As such, the entirety of the GCP Note is included in the current portion of long-term debt line item of the accompanying financial statements.

Interest expense recorded under the GCP Note was $116 and $116 for the three and six-month periods ended July 30, 2022.

Debt discount and issuance costs, net of amortization, relating to the GCP Note were $211 as of July 30, 2022 and are included as a direct reduction to the GCP Note liability balance within the accompanying consolidated balance sheets. The balance of these costs is being expensed as additional interest over the 13-month term of the GCP Note at an effective interest rate of 23.5%. The Company recorded a loss on debt extinguishment of $884 including $509 of debt issuance costs.

8.50% Senior Unsecured Notes

On September 28, 2021, the Company issued and sold $80,000 aggregate principal amount of the 2026 Notes pursuant to a registered public offering under a shelf registration statement. The Company received related net proceeds of $73,700 after deducting the underwriting discount and estimated offering expenses payable by the Company (including fees and reimbursements to the underwriters). The 2026 Notes were issued under an indenture, dated September 28, 2021 (the “Base Indenture”), between the Company and U.S. Bank National Association, as trustee (the “Trustee”), as supplemented by the First Supplemental Indenture, dated September 28, 2021 (the “Supplemental Indenture,” and the Base Indenture as supplemented by the Supplemental Indenture, the “Indenture”), between the Company and the Trustee. The 2026 Notes were denominated in denominations of $25.00 and integral multiples of $25.00 in excess thereof.

The 2026 Notes pay interest quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing on December 31, 2021, at a rate of 8.50% per year, and will mature on September 30, 2026.

The 2026 Notes are the senior unsecured obligations of the Company. There is no sinking fund for the 2026 Notes. The 2026 Notes are the obligations of iMedia Brands, Inc. only and are not obligations of, and are not guaranteed by, any of the Company’s subsidiaries. The Company may redeem the 2026 Notes for cash in whole or in part at any time at its option (i) on or after September 30, 2023 and prior to September 30, 2024, at a price equal to $25.75 per note, plus accrued and unpaid interest to, but excluding, the date of redemption, (ii) on or after September 30, 2024 and prior to September 30, 2025, at a price equal to $25.50 per note, plus accrued and unpaid interest to, but excluding, the date of redemption, and (iii) on or after September 30, 2025 and prior to maturity, at a price equal to $25.25 per note, plus accrued and unpaid interest to, but excluding, the date of redemption. The Indenture provides for events of default that may, in certain circumstances, lead to the outstanding principal and unpaid interest of the 2026 Notes becoming immediately due and payable. If a Mandatory Redemption Event (as defined in the Supplemental Indenture) occurs, the Company will have an obligation to redeem the 2026 Notes, in whole but not in part, within 45 days after the occurrence of the Mandatory Redemption Event at a redemption price in cash equal to $25.50 per note plus accrued and unpaid interest, if any, to, but excluding, the date of redemption.

The Company used all the net proceeds from the offering to fund its closing cash payment in connection with the acquisition of 1-2-3.tv Invest GmbH and 1-2-3.tv Holding GmbH (collectively with their direct and indirect subsidiaries, the “1-2-3.tv Group”), and any remaining proceeds for working capital and general corporate purposes, which included payments related to the acquisition.

Interest expense recorded under the 8.50% Senior Unsecured Notes was $2,036 and $4,073 for the three and six-month periods ended July 30, 2022 and $0 for the three and six-month periods ended July 31, 2021.

Debt issuance costs, net of amortization, relating to the Senior Unsecured Notes were $5,291 and $5,925 as of July 30, 2022, and January 29, 2022, respectively and are included as a direct reduction to the 2026 Notes liability balance within the accompanying consolidated balance sheets. The balance of these costs is being expensed as additional interest over the five-year term of the 2026 Notes at an effective interest rate of 10.1%.

Revolving Loan

The Company and certain of its subsidiaries, as borrowers, are party to a loan and security agreement (as amended, the “Loan Agreement”) with Siena Lending Group LLC and the other lenders party thereto from time to time, Siena Lending Group LLC, as agent (the “Agent”), and certain additional subsidiaries of the Company, as guarantors thereunder. The Loan Agreement was originally entered into on July 30, 2021, has a three-year term and provides for up to a $80,000 revolving loan. Subject to certain conditions, the Loan Agreement also provides for the issuance of letters of credit in an aggregate amount up to $5,000 which, upon issuance, would be deemed advances under the revolving loan. Proceeds of borrowings were used to refinance all indebtedness owing to PNC Bank, National Association, to pay the fees, costs, and expenses incurred in connection with the Loan Agreement and the transactions contemplated thereby, for working capital purposes, and for such other purposes as specifically permitted pursuant to the terms of the Loan Agreement. The Company’s obligations under the Loan Agreement are secured by substantially all its assets and the assets of its subsidiaries as further described in the Loan Agreement.

On April 18, 2022, the parties to the Loan Agreement entered an amendment (the “Fourth Amendment”), which revised the agreement to consent to enter into the securities purchase agreement with GCP and sell the GCP Note.

On May 6, 2022, the parties to the Loan Agreement entered an amendment (the “Fifth Amendment”), which revised the agreement to add iMDS as a new borrower and amend certain terms and conditions set forth in the Loan Agreement.

On May 27, 2022, the parties to the Loan Agreement entered an amendment (the “Sixth Amendment”), which revised the agreement to consent to the repayment of the short-term loan advanced by 1-2-3.TV GmbH in the amount of $1,500. The Sixth Amendment also amended the required minimum liquidity and maximum senior debt leverage ratio criteria among other terms and conditions set forth in the Loan Agreement.

On September 12, 2022, the parties to the Loan Agreement entered an amendment (the “Seventh Amendment”), which revised the agreement to amend required minimum liquidity and maximum senior debt leverage ratio criteria among other terms and conditions set forth in the Loan Agreement.

Subject to certain conditions, borrowings under the Loan Agreement bear interest at 4.50% plus the LIBOR for a period of 30 days as published in The Wall Street Journal three business days prior to the first day of each calendar month. There is a floor for LIBOR of 0.50%. As of the Sixth Amendment, LIBOR was replaced with the Secured Overnight Financing Rate.

The Loan Agreement contains customary representations and warranties and financial and other covenants and conditions, including, among other things, minimum liquidity requirements. The Company is also subject to a maximum senior net leverage ratio. In addition, the Loan Agreement places restrictions on the Company’s ability to incur additional indebtedness or prepay existing indebtedness, to create liens or other encumbrances, to sell or otherwise dispose of assets, to merge or consolidate with other entities, and to make certain restricted payments, including payments of dividends to shareholders. The Company also pays a monthly fee at a rate equal to 0.50% per annum of the average daily unused amount of the credit facility for the previous month.

As of July 30, 2022, the Company had total borrowings of $62,643 under its revolving loan with Siena. Remaining available capacity under the revolving loan as of July 30, 2022 was approximately $534, which provided liquidity for working capital and general corporate purposes. As of July 30, 2022, the Company was in compliance with applicable financial covenants of the Revolving Loan and expects to be in compliance with applicable financial covenants over the next twelve months.

Interest expense recorded under the Revolving Loan was $1,192 and $2,222 for the three and six-month periods ended July 30, 2022 and $0 for the three and six-month periods ended July 31, 2021.

Deferred financing costs, net of amortization, relating to the revolving loan were $2,635 and $2,411 as of July 30, 2022 and January 29, 2022 and are included within other assets within the accompanying condensed consolidated balance sheets. The balance of these costs is being expensed as additional interest over the three-year term of the Loan Agreement.

Real Estate Financing

On July 30, 2021, two of the Company’s subsidiaries, VVI Fulfillment Center, Inc. and EP Properties, LLC, as borrowers, and the Company, as guarantor, entered a promissory note secured by mortgages (the “GreenLake Note”) with GreenLake Real Estate Finance LLC (“GreenLake”) whereby GreenLake agreed to make a secured term loan (the “Term Loan”) to the borrowers in the original amount of $28,500. The GreenLake Note is secured by, among other things, mortgages encumbering the Company’s owned properties in Eden Prairie, Minnesota and Bowling Green, Kentucky (collectively, the “Mortgages”) as well as other assets as described in the GreenLake Note. Proceeds of borrowings shall be used to (i) pay fees and expenses related to the transactions contemplated by the GreenLake Note, (ii) make certain payments approved by GreenLake to third parties, and (iii) provide for working capital and general corporate purposes of the Company. The Company has also pledged the stock that it owns in the Borrowers to secure its guarantor obligations.

The GreenLake Note is scheduled to mature on July 31, 2024. The borrowings, which include all amounts advanced under the GreenLake Note, bear interest at 10.00% per annum or, at the election of the Lender upon no less than 30 days prior written notice to the borrowers, at a floating rate equal to the prime rate plus 200 basis points.

The GreenLake Note was able to be prepaid in full (but not in part) before July 30, 2022 (the “Lockout Date”) upon payment of a prepayment premium equal to the amount of interest that would have accrued from the date of prepayment through the Lockout Date. Since the Lockout Date, the GreenLake Note may be prepaid in full or in any installment greater than or equal to $100,000 without any prepayment penalty or premium on 90 days’ prior written notice from borrowers to GreenLake.

The GreenLake Note contains customary representations and warranties and financial and other covenants and conditions, including, a requirement that the borrowers comply with all covenants set forth in the Loan Agreement described above. The GreenLake Note also contains certain customary events of default.

As of July 30, 2022, there was $28,500 outstanding under the term loan with GreenLake, all of which was classified as long-term in the accompanying condensed consolidated balance sheet. Principal borrowings under the term loan are non-amortizing over the life of the loan.

Interest expense recorded under the GreenLake Note was $889 and $1,777 for the three and six-month periods ended July 30, 2022 and $0 for the three and six-month periods ended July 31, 2021.

Debt issuance costs, net of amortization, relating to the GreenLake Note were $1,345 and $1,682 as of July 30, 2022, and January 29, 2022, respectively and are included as direct reductions to the GreenLake Note liability balance within the accompanying consolidated balance sheets. The balance of these costs is being expensed as additional interest over the three-year term of the GreenLake Note at an effective interest rate of 12.4%.

Seller Notes

On November 5, 2021 the Company issued an unsecured promissory note in the amount of $20,800 as a component of consideration paid to the seller for our acquisition of 1-2-3.tv. The seller note is payable as follows: $2,557 in November 2022, $6,648 in February 2023, and the balance in November 2023. The seller note bears interest at a rate of 8.50%. $18,409 was outstanding as of July 30, 2022. Interest expense recorded under the seller note was $400 and $817 for the three and six-months ended July 30, 2022.

On July 30, 2021, the Company issued a $10,000 unsecured promissory note as a component of consideration paid to seller for our acquisition of Synacor’s Portal and Advertising business. The seller note is payable in $1,000 quarterly installments, maturing on December 31, 2023. The seller notes bear interest at rates between 6% and 11% depending upon the period outstanding. $6,000 is outstanding as of July 30, 2022. Interest expense recorded under the seller note was $62 and $176 for the three and six-months ended July 30, 2022.

Maturities

The aggregate maturities of borrowings outstanding under the Company’s long-term debt obligations as of July 30, 2022 were as follows:

	Seller		Real Estate				8.5% Senior			Convertible
Fiscal year	Notes		Financing		Revolving Loan		Unsecured Notes			Debt	Total
2022	$	4,295	$	—	$	—	$	—	$	—	$	4,295
2023		20,114		—		—		—		3,100		23,214
2024		—		28,500		62,643		—		—		91,143
2025		—		—		—		—		—		—
2026		—		—		—		80,000		—		80,000
Total amount due	$	24,409	$	28,500	$	62,643	$	80,000	$	3,100	$	198,652
Less: unamortized debt issuance costs and debt discount		—		(1,345)		—		(5,291)		(162)		(6,798)
Plus: unamortized debt premium		1,218		—		—		—		—		1,218
Total carrying amount of debt	$	25,627	$	27,155	$	62,643	$	74,709	$	2,938	$	193,072

Restricted Cash

The Company is required to keep cash in a restricted account to secure letters of credit to purchase inventory as well as to secure the Company’s corporate purchasing card program. The Company had $1,575 and $1,893 in restricted cash accounts as of July 30, 2022, and January 29, 2022.