e.l.f. Beauty,Inc. (NYSE:ELF) Files An 8-K Entry into a Material Definitive Agreement
Item1.01
| Entry into a Material Definitive Agreement. |
Senior Secured Credit Facility
Overview
On December23, 2016, e.l.f. Beauty, Inc. (the Company), as parent
guarantor, and e.l.f. Cosmetics, Inc., JA 139 Fulton Street
Corp., JA 741 Retail Corp., JA Cosmetics Retail, Inc., J.A. RF,
LLC and J.A. Cherry Hill, LLC, each as a borrower, entered into a
senior secured credit agreement (together with related loan and
security documents, the Senior Secured Credit Facility) with Bank
of Montreal, as the administrative agent, swingline lender and
l/c issuer and the lenders from time to time party thereto, which
provided a $165million term loan facility (the Term Loan
Facility) and a$35million revolving credit facility (the
Revolving Credit Facility). The proceeds from the Term Loan
Facility were used to refinance the debt of e.l.f. Cosmetics,
Inc., JA 139 Fulton Street Corp., JA 741 Retail Corp., JA
Cosmetics Retail, Inc., J.A. RF, LLC and J.A. Cherry Hill, LLC
(which debt is guaranteed by the Company); pay related fees,
costs and expenses; fund working capital; and for general
corporate purposes. The borrowers, together with the Company and
the subsidiary guarantors party thereto, are loan parties under
the Senior Secured Credit Facility.
As of December23, 2016, there were borrowings of $0 and undrawn
letters of credit outstanding in an amount of $462,579.17 under
the Revolving Credit Facility and $165million of borrowings
outstanding under the Term Loan Facility.
Interest rate and fees
Borrowings under both the Term Loan Facility and the Revolving
Credit Facility bear interest, at the borrowers option, at either
(i)a rate per annum equal to an adjusted LIBOR rate determined by
reference to the cost of funds for U.S. dollar deposits for the
applicable interest period (subject to a minimum floor of 0%)
plus an applicable margin ranging from 2.00% to 3.50% based on
the Companys consolidated total net leverage ratio or (ii)a
floating base rate plus an applicable margin ranging from 1.00%
to 2.50% based on the Companys consolidated total net leverage
ratio. At closing, the applicable margin for both the Revolving
Credit Facility and the Term Loan Facility was 3.50% for the
adjusted LIBOR rate and 2.50% for the floating base rate.
Interest on borrowings under the Senior Secured Credit Facility
is payable (i)on the last day of any interest period with respect
to LIBOR borrowing with an applicable interest period of three
months or less, (ii)every three months with respect to LIBOR
borrowings with an interest period of greater than three months
or (iii)on the last business day of each March, June, September
and December with respect to base rate borrowings. In addition,
the Senior Secured Credit Facility requires payment of an unused
fee ranging from 0.35% to 0.25% (based on the Companys
consolidated total net leverage ratio) times the average daily
amount of unutilized commitments under the Revolving Credit
Facility. At closing, the unused line fee was 0.35%. The unused
fee is payable on the last day of each quarter. The borrowers are
also required to pay customary letter of credit fees and an
annual administrative agent fee.
Prepayments
The Senior Secured Credit Facility requires prepayment of
outstanding loans, subject to certain exceptions, with:
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50% (which percentage will be reduced to 25% if the Companys consolidated total net leverage ratio is less than or equal to 3.50:1.00 but greater than 3.00:1.00 and 0% if the Companys consolidated total net leverage ratio is less than or equal to 3.00:1.00, in each case as determined as of the last day of the applicable fiscal year and subject to certain reductions) of the Companys annual excess cash flow (defined as EBITDA less certain customary deductions including, without limitation, unfinanced capital expenditures, fees and expenses under loan documents, insurance proceeds and others); |
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50% of the net cash proceeds of all non-ordinary course asset sales or other dispositions of property by the loan parties and their respective subsidiaries (including insurance and condemnation proceeds, subject tode minimisthresholds), subject to customary reinvestment rights; and |
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50% of the net proceeds of any issuance or incurrence of debt by the loan parties or any of their respective subsidiaries, other than debt permitted under the Senior Secured Credit Facility. |
The foregoing mandatory prepayments are used to first reduce the
principal installments of the Term Loan Facility (prepaying the
then-next four principal installments in direct order of
maturity, then pro rata to the remaining principal installments),
second, to the Revolving Credit Facility (without a corresponding
reduction in the revolving credit commitment) and third, to cash
collateralize the remaining l/c obligations.
The Company may voluntarily repay outstanding loans under the
Senior Secured Credit Facility at any time without premium or
penalty.
Amortization
Amortization installment payments on the Term Loan Facility are
required to be made in quarterly installments of (i)$2,062,500
for fiscal quarters ending March31, 2017 through December31,
2018, (ii) $2,475,000 for fiscal quarters ending March31, 2019
through December31, 2019, (iii) $3,093,750 for fiscal quarters
ending March31, 2020 through December31, 2020 and (iv)$4,125,000
for fiscal quarters ending March31, 2021 through September30,
2021. The remaining outstanding amount will be due and payable on
December23, 2021, the maturity date for the Term Loan Facility.
Principal amounts outstanding under the Revolving Credit Facility
will be due and payable in full on December23, 2021, the maturity
date for the Revolving Credit Facility.
Guarantee and security
All obligations under the Senior Secured Credit Facility are
unconditionally guaranteed by the Company and, subject to certain
exceptions, each of the Companys current and future domestic
subsidiaries. All obligations under the Senior Secured Credit
Facility, and the guarantees of those obligations, are secured by
substantially all of the following assets of the each borrower
and guarantor, subject to certain exceptions, including:
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a pledge of 50% of the capital stock of each of the borrowers and 50% of the equity interests directly held by each borrower and guarantor in any subsidiary of the borrower or guarantor (which pledge, in the case of any (i)non-U.S. subsidiary of a U.S. subsidiary or (ii)certain excluded U.S. subsidiaries, will not include more than 65% of the voting stock of such subsidiary), subject to certain exceptions; and |
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a security interest in substantially all tangible and intangible assets (including intellectual property) of each borrower and guarantor, subject to certain exceptions. |
Certain covenants and events of default
The Senior Secured Credit Facility contains a number of covenants
that, among other things, restrict the ability of the loan
parties and their respective subsidiaries to (subject to certain
exceptions):
| incur additional indebtedness or issue preferred stock; |
| create liens on assets; |
| enter into sale and leaseback transactions; |
| engage in mergers or consolidations; |
| sell or otherwise dispose of assets; |
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pay dividends and distributions or repurchase the Companys capital stock; |
| make investments, loans or advances; |
| repay certain subordinated indebtedness; |
| make certain acquisitions; |
| engage in certain transactions with affiliates; |
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amend material agreements governing subordinated indebtedness; and |
| change the line of business. |
The Senior Secured Credit Facility also contains customary
representations and warranties, affirmative covenants, notice
provisions and events of default, including a change of control.
The Senior Secured Credit Facility includes quarterly maintenance
covenants that require maintenance of (a)a certain consolidated
total net leverage ratio of not more than 4.25 to 1.00 with
gradual step-downs over the life of the Senior Secured Credit
Facility, ultimately reaching a level of to 2.75 to 1.00 for
fiscal quarters ending on or after September30, 2020 and (b)a
fixed charge coverage ratio of not less than 1.15 to 1.00. Each
of the quarterly maintenance covenants will be first tested as of
the fiscal quarter ending March31, 2017. The availability of
certain baskets and the ability to enter into certain
transactions (including the ability of the Company to pay
dividends to its stockholders) may also be subject to compliance
with such leverage ratios and other limitations.
The foregoing description of the Senior Secured Credit Facility
does not purport to be complete and is qualified in its entirety
by reference to the full text of the Senior Secured Credit
Facility, which is filed as Exhibit 10.1 hereto and incorporated
herein by reference.
Amendment No.1 to Amended and Restated Stockholders
Agreement
On December23, 2016, the Company and TPG elf Holdings, L.P., a
Delaware limited partnership (TPG), entered into Amendment No.1
(the Amendment) to the Amended and Restated Stockholders
Agreement, dated as of September21, 2016, by and among the
Company, TPG and other security holders of the Company party
thereto (the Stockholders Agreement). TPG is the registered
holder of approximately 43% of the outstanding shares of common
stock of the Company and may be deemed to have beneficial
ownership of additional shares under the Stockholders Agreement,
as amended by the Amendment.
The Amendment amends the Stockholders Agreement to remove the
requirement that each party to the Stockholders Agreement who is
an employee, consultant or director of the Company or its
subsidiaries and related trusts vote their shares of Company
stock in accordance with the voting provisions set forth in the
Stockholders Agreement, and to exclude such parties from the
irrevocable proxy set forth in the Stockholders Agreement,
provided that Tarang P. Amin and related trusts will remain
subject to the irrevocable proxy with respect to 5,400,634 shares
of common stock of the Company owned by Tarang P. Amin and
related trusts immediately prior to the effectiveness of the
registration statement on Form S-1 in connection with the initial
public offering of shares of common stock of the Company.
The foregoing description of the Amendment does not purport to be
complete and is qualified in its entirety by reference to the
full text of the Amendment, which is filed as Exhibit 10.2
hereto, and the Stockholders Agreement, which is filed as Exhibit
4.1 to the Companys quarterly report on Form 10-Q for the
quarterly period ended September30, 2016 filed with the
Securities and Exchange Commission on November14, 2016, each of
which is incorporated herein by reference.
| Item1.02 |
Termination of a Material Definitive Agreement. |
In connection with the entry into the Senior Secured Credit
Facility described under Item 1.01 above, the proceeds from the
Term Loan Facility were used to refinance the debt of e.l.f.
Cosmetics, Inc., JA 139 Fulton Street Corp., JA 741 Retail Corp.,
JA Cosmetics Retail, Inc., J.A. RF, LLC and J.A. Cherry Hill,
LLC, and the Credit Agreement, dated as of January31, 2014, by
and among the Company, Bank of Montreal, as administrative agent,
swingline lender and l/c issuer, and the other parties thereto,
as amended to date, and the ancillary loan documents in
connection therewith, were terminated on December23, 2016.
| Item9.01 | Financial Statements and Exhibits. |
Reference is made to the ExhibitIndex attached hereto.
About e.l.f. Beauty, Inc. (NYSE:ELF)
e.l.f. Beauty, Inc., formerly J.A. Cosmetics Holdings, Inc., is a cosmetic company. The Company conducts its business under the name e.l.f. Cosmetics, and offers products for eyes, lips and face to consumers through its retail customers, e.l.f. stores and e-commerce channels. The Company offers a range of products for eyes, such as eyeshadow, eyeliner, mascara and eyelashes, eyebrows, concealer and primer, brushes and tools, and sets and palettes. The Company offers lipstick, lip gloss, lipliner, and lip care and brushes. The Company launches its products on elfcosmetics.com, and distribution is generally only broadened to its retail customers after it receives consumer validation online. The Company sells its products in national and international retailers (with international primarily serviced by distributors) and direct-to-consumer channels. It sells its products in retail stores in the United States across mass, drug store, food and specialty retail channels. e.l.f. Beauty, Inc. (NYSE:ELF) Recent Trading Information
e.l.f. Beauty, Inc. (NYSE:ELF) closed its last trading session down -0.07 at 29.29 with 570,648 shares trading hands.
