ARMSTRONG FLOORING, INC. (NYSE:AFI) Files An 8-K Entry into a Material Definitive Agreement

ME Staff 8-k

4 years ago

ARMSTRONG FLOORING, INC. (NYSE:AFI) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01

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

Facility) of $30 million and, during a Financial Covenant Trigger Period (as defined in the Amendment), maintain a minimum a Consolidated Fixed Charge Coverage Ratio (as defined in the Amendment) of at least 1.00 to 1.00 (such covenants, the Financial Covenants).

New Term Loan Facility

On June 23, 2020, the Company entered into a credit agreement (the Term Loan Agreement), by and among the Company, as borrower, the guarantors named therein, the lenders party thereto and Pathlight Capital LP, as administrative agent (in such capacity, the Term Loan Agent).

The Term Loan Agreement provides the Company with a secured term loan credit facility of $70 million (the Term Loan Facility). The Term Loan Facility provides for a borrowing base that is derived from the Companys machinery and equipment, intellectual property and real property, subject to certain reserves and other limitations. The Term Loan Facility is scheduled to mature on June 23, 2025.

Borrowings under the Term Loan Facility will bear interest at a rate per annum equal to LIBOR for a three-month interest period, plus an applicable margin of 12.0%.

The Company must use cash proceeds from certain dispositions, including sales of real estate, equity and debt issuances and extraordinary events to prepay outstanding loans under the Term Loan Facility, subject to specified exceptions, including the prepayment requirements with respect to the Amended ABL Credit Facility. Prepayments of loans under the Term Loan Facility prior to the third anniversary of the closing date are subject to certain premiums.

All obligations under the Term Loan Agreement are guaranteed by each of the Companys wholly owned domestic material subsidiaries. All obligations under the Term Loan Agreement, and guarantees of those obligations, are secured by a first priority lien on the Term Priority Collateral and a second priority lien on the ABL Priority Collateral.

The Term Loan Agreement contains a number of covenants that, among other things and subject to certain exceptions, restrict the Companys ability and the ability of its subsidiaries to create liens, to undertake fundamental changes, to incur debt, to sell or dispose of assets, to make investments, to make restricted payments such as dividends, distributions or equity repurchases, to change the nature of their businesses, to enter into transactions with affiliates and to enter into certain burdensome agreements.

In addition, the Term Loan Agreement requires the Company to comply with the Financial Covenants.

The Term Loan Agreement also contains customary affirmative covenants and events of default, including a cross-default provision in respect of certain material indebtedness and a change of control provision. If an event of default occurs, the lenders may choose to accelerate the maturity of the Term Loan Facility and require repayment of all obligations thereunder.

The foregoing summaries of the Amendment and the Term Loan Agreement do not purport to be complete and are subject to and qualified in their entirety by reference to the Amendment and the Term Loan Agreement, copies of which are filed as Exhibits 10.1 and 10.2 hereto and are incorporated herein by reference.

Section 7 Regulation FD

On June 23, 2020, the Company issued a press release announcing the Amended ABL Credit Facility and Term Loan Facility. The full text of the press release is attached hereto as Exhibit 99.1.

The information in Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1, is being furnished herewith and shall not be deemed filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.

(d) Exhibits

10.1		Third Amendment to Credit Agreement, dated as of June 23, 2020, by and among Armstrong Flooring, Inc., as borrower, the guarantors named therein, the lender parties thereto and Bank of America, N.A., as administrative agent for the lenders thereunder.
10.2		Term Loan Agreement, dated as of June 23, 2020, by and among Armstrong Flooring, Inc., as borrower, the guarantors named therein, the lender parties thereto and Pathlight Capital LP, as administrative agent and collateral agent.
99.1		Press Release of Armstrong Flooring, Inc., dated June 23, 2020.

Armstrong Flooring, Inc. Exhibit
EX-10.1 2 d946672dex101.htm EX-10.1 EX-10.1 Exhibit 10.1 Execution Version THIRD AMENDMENT TO CREDIT AGREEMENT This THIRD AMENDMENT TO CREDIT AGREEMENT,…
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About ARMSTRONG FLOORING, INC. (NYSE:AFI)

Armstrong Flooring, Inc. is engaged in the designing and manufacturing of flooring solutions that inspire spaces where people live, work, learn, heal and play. The Company manufactures resilient and wood flooring products across North America. The Company safely and responsibly operates approximately 18 manufacturing facilities in three countries. The Company’s headquarters is located in Lancaster, Pennsylvania.