ARMSTRONG FLOORING, INC. (NYSE:AFI) Files An 8-K Entry into a Material Definitive Agreement
Amended ABL Credit Facility
On June 23, 2020, Armstrong Flooring, Inc. (the Company) entered into a Third Amendment to Credit Agreement (the Amendment), by and among the Company, as borrower, the guarantors named therein, the lenders party thereto and Bank of America, N.A., as administrative agent and collateral agent (in such capacities, the ABL Agent), as letter of credit issuer and as swingline lender.
The Amendment amends that certain Credit Agreement, dated as of December 31, 2018, by and among the Company, the guarantors named therein, the lenders party thereto and the ABL Agent (as amended, restated, supplemented or otherwise modified from time to time, including by the Amendment, the Amended ABL Credit Facility), in order to, among other things, reduce commitments thereunder from $100 million to $90 million, amend the interest rates applicable to the loans thereunder, modify certain financial maintenance and other covenants thereunder, as described further below, and permit indebtedness under that certain Term Loan Agreement (as defined below). The Amended ABL Credit Facility provides for a borrowing base that is derived from the Companys accounts receivable and inventory (collectively, with the equity interests in the guarantors, the ABL Priority Collateral), subject to certain reserves and other limitations.
The Amendment permits the Company to grant a first priority security interest in real estate, machinery and equipment and intellectual property collateral to the Term Loan Agent (as defined below) (collectively, the Term Loan Priority Collateral). The ABL Agent will not have a security interest in the real property securing the Term Loan Agreement but will have a second priority security interest in machinery and equipment and intellectual property constituting Term Loan Priority Collateral.
Borrowings under the Amended ABL Credit Facility will bear interest at a rate per annum equal to, at the Companys option, a base rate or a Eurodollar rate equal to the London interbank offered rate (LIBOR) for the relevant interest period, plus, in each case, an applicable margin determined in accordance with the provisions of the Amendment. The base rate will be the highest of (a) the federal funds rate plus 0.50%, (b) the prime rate of Bank of America, N.A., and (c) one month LIBOR plus 1.00%. The applicable margin for borrowings under the Amended ABL Credit Facility will be determined based on the Companys Consolidated Leverage Ratio (as defined in the Amendment) and will range from 1.75% to 3.00% with respect to base rate borrowings and 2.75% to 4.00% with respect to Eurodollar rate borrowings. In addition to paying interest on outstanding principal under the Amended ABL Credit Facility, the Company will pay a commitment fee to the lenders under the Amended ABL Credit Facility with respect to the unutilized revolving commitments thereunder at a rate ranging from 0.375% to 0.50% depending on the Companys Consolidated Leverage Ratio.
The Amendment adds an anti-cash hoarding covenant, which requires the Company and its domestic subsidiaries to limit the amount of cash and cash equivalents in the United States that they hold on their balance sheet to $5,000,000 (subject to certain limited exceptions) and to prepay any outstanding loans under the Amended ABL Credit Facility if such amount exceeds $5,000,000 in an amount equal to the amount of such excess.
In addition, the Amendment also amends certain financial covenants applicable to the Company and its subsidiaries. The Amended ABL Credit Facility requires, among other things, that the Company and its subsidiaries maintain a minimum Consolidated Cash Flow (as defined in the Amendment) for the three-fiscal quarter period ending September 30, 2020 and for any four-fiscal quarter period ending thereafter, have minimum Availability (as defined in the Amended Credit ABL