PIER 1 IMPORTS, INC. (NYSE:PIR) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01.
As previously reported, on February 17, 2020 (the Petition Date), Pier 1 Imports, Inc. (Pier 1) and all of its subsidiaries (together with Pier 1, the Debtors), filed voluntary petitions (the Chapter 11 Cases) for reorganization under Chapter 11 of the U.S. Bankruptcy Code (the Bankruptcy Code) in the U.S. Bankruptcy Court for the Eastern District of Virginia (the Bankruptcy Court). The Chapter 11 Cases are being jointly administered under the caption In re Pier 1 Imports, Inc., et al., No 20-30805 (KRH). Capitalized terms used but not otherwise defined in this Current Report on Form 8-K will have the meaning given to them in the DIP Credit Agreement (as defined below).
Debtor-in-Possession Credit Facility
On February 20, 2020, Pier 1 entered into a Senior Secured Super-Priority Debtor in Possession Credit Agreement, by and among Pier 1 Imports (U.S.), Inc., as borrower, the guarantors party thereto, Bank of America, N.A., as administrative agent and collateral agent, Pathlight Capital LP (or an affiliated debt fund), as administrative agent for the ABL term lenders, and the lender parties thereto (the DIP Credit Agreement).
The DIP Credit Agreement provides for approximately $256 million in superpriority secured debtor-in-possession credit facilities comprising of: (i) a superpriority revolving credit facility in an aggregate amount of $200 million (the Revolving Facility); (ii) a superpriority FILO loan facility in an aggregate amount of $15 million (the FILO Facility); and (iii) a superpriority ABL term loan facility in an aggregate principal amount of approximately $41 million (the ABL Term Loan Facility and, together with the Revolving Facility and the FILO Facility, the DIP Facilities), subject to the terms and conditions set forth therein.
The proceeds of the DIP Facilities will be used, in part, to refinance in full the Debtors prepetition ABL credit facility and provide incremental liquidity for working capital and letters of credit, administrative costs, premiums, fees and expenses of administering the Chapter 11 Cases, payment of court approved prepetition obligations and other such purposes consistent with the DIP Facilities and the budget or as otherwise approved by the agent and lenders.
The maturity date of the DIP Facilities is August 20, 2020. Loans under the Revolving Facility will bear interest at: (1) 2.00% plus a base rate of the highest of (a) the rate of interest in effect for such day as publicly announced from time to time by Bank of America, N.A. as its prime rate, (b) the Federal Funds Effective Rate for such day, plus 0.50%, and (c) the LIBO Rate for a one month interest period as determined on such day, plus 1.00% (the Base Rate); or (2) 3.00% plus the LIBO Rate. Loans under the FILO Facility will bear interest at (a) 3.50% plus the Base Rate, or (b) 4.50% plus the LIBO Rate. Loans under the ABL Term Loan Facility will bear interest at the 3 month LIBO Rate, plus 8.00%. From and after the Effective Date, a non-refundable unused commitment fee will accrue at the rate of 0.375% per annum on the daily average unused portion of the Revolving Facility (whether or not then available).
The Debtors obligations under the DIP Credit Agreement are guaranteed by Pier 1 and each of the other Debtors and are secured by substantially all of the real and personal property of the Debtors, subject to certain exceptions. The DIP Credit Agreement includes customary negative covenants for debtor-in-possession loan agreements of this type, including covenants limiting Pier 1s and its subsidiaries ability to, among other things, incur additional indebtedness, create liens on assets, make investments, loans or advances, engage in mergers, consolidations, sales of assets and acquisitions, pay dividends and distributions and make payments in respect of junior or pre-petition indebtedness, in each case subject to customary exceptions for debtor-in-possession loan agreements of this type.
The DIP Credit Agreement also includes certain customary representations and warranties, affirmative covenants and events of default, including, but not limited to, payment defaults, breaches of representations
and warranties, covenant defaults, certain events under ERISA, unstayed judgments in favor of a third party involving an aggregate liability in excess of $1 million, change of control, specified governmental actions having a material adverse effect and condemnation or damage to a material portion of the collateral. Certain bankruptcy-related events are also events of default, including, but not limited to, the dismissal by the Bankruptcy Court of any of the Chapter 11 Cases, the conversion of any of the Chapter 11 Cases to a case under Chapter 7 of the Bankruptcy Code, the appointment of a trustee to Chapter 11 of the Bankruptcy Code, failure to enter the final order approving the DIP Facilities by March 13, 2020, and certain other events related to the impairment of the DIP Lenders rights or liens granted under the DIP Credit Agreement. Pier 1s senior secured term loan facility that matures on April 30, 2021 (Term Loan Facility) continues to be outstanding. As of February 21, 2020, the Company had $189 million outstanding under the Term Loan Facility.
On February 18, 2020, the Debtors filed a motion for the approval of the DIP Facilities with the Bankruptcy Court, which was granted on the record.
The foregoing description of the DIP Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the DIP Credit Agreement, which is attached as Exhibit 10.1 hereto and incorporated by reference herein.
The information set forth in Item 1.01 regarding the DIP Facilities and DIP Credit Agreement is incorporated by reference into this Item 2.03.
On February 18, 2020, Pier 1 was notified by the staff of New York Stock Exchange (NYSE) Regulation providing that it had determined to commence proceedings to delist the common stock of Pier 1 from the NYSE and that trading in Pier 1 common stock would be suspended immediately.
NYSE Regulation reached its decision that Pier 1 is no longer suitable for listing to NYSE Listed Company Manual Section 802.01D after Pier 1s disclosure on February 17, 2020 that it has commenced voluntary Chapter 11 proceedings in the Bankruptcy Court. The letter also indicated that the NYSEs application to the Securities and Exchange Commission (SEC) to delist the common stock is pending, subject to the completion of all applicable procedures, including any appeal by Pier 1 to the NYSE Regulations decision.
Pier 1 does not intend to appeal the determination and, therefore, it is expected that the common stock will be delisted. Trading of Pier 1s common stock has commenced on the OTC Bulletin Board or pink sheets market under the symbol PIRRQ. The transition does not affect Pier 1s operations or business and does not change its reporting requirements under SEC rules.
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Cautionary Statement Concerning Forward-Looking Statements
Certain statements contained in this report may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Pier 1 and the other Debtors may also make forward-looking statements in other reports filed with the United States Securities and Exchange Commission (SEC), in press releases, in presentations and in material delivered to Pier 1s shareholders. Forward-looking statements provide current expectations of future events based on managements assumptions and assessments in light of past experience and trends, current economic and industry conditions, expected future developments, and other relevant factors. These statements encompass information that does not directly relate to any historical or current fact and often may be identified with words such as believe, expect, estimate, anticipate, plan, may, will, intend and other similar expressions.
Managements expectations and assumptions regarding: risks and uncertainties relating to the Chapter 11 Cases, including but not limited to, Pier 1s ability to obtain Bankruptcy Court approval with respect to motions in the Chapter 11 Cases; the effects of the Chapter 11 Cases on Pier 1 and on the interests of various constituents; Bankruptcy Court rulings in the Chapter 11 Cases and the outcome of the Chapter 11 Cases in general; the length of time the Debtors will operate under the Chapter 11 Cases; risks associated with third-party motions in the Chapter 11 Cases; the potential adverse effects of the Chapter 11 Cases on Pier 1s liquidity or results of operations and increased legal and other professional costs necessary to execute the Debtors reorganization; Bankruptcy Court approval of the Debtors proposed debtor in possession financing; the conditions to which Pier 1s debtor in possession financing is subject and the risk that these conditions may not be satisfied for various reasons, including for reasons outside of the Debtors control; Pier 1s ability to consummate sales of its assets and the terms and conditions of any such sales; the effectiveness of Pier 1s marketing campaigns, merchandising and promotional strategies and customer databases; consumer spending patterns; inventory levels and values; the effectiveness of Pier 1s relationships with, and operations of, its key suppliers; risks related to changes in U.S. policy related to imported merchandise, particularly with regard to the impact of tariffs on goods imported from China and strategies undertaken to mitigate such impact; changes in foreign currency values relative to the U.S. dollar; Pier 1s ability to retain its senior management team; continued volatility in the price of Pier 1s common stock; Pier 1s ability to comply with the terms of the DIP Credit Agreement; the expected delisting of Pier 1 common stock from the NYSE; and other future results are subject to risks, uncertainties and other factors that could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements.
Additional risks and uncertainties that may affect the Debtors operations and performance include, among others: the failure by Pier 1 to identify, develop and successfully implement immediate action plans and longer-term strategic initiatives; the inability of Pier 1 to anticipate, identify and respond to changing customer trends and preferences for home décor and furniture and to identify, source, ship and deliver items of acceptable quality to its U.S. distribution and fulfillment centers, stores and customers at reasonable prices and rates in a timely fashion; risks related to outsourcing certain business processes to third-party vendors, including disruptions in business, cyber security threats and increased costs; an overall decline in the health of the U.S. economy and its impact on consumer confidence and spending; disruptions in Pier 1s domestic supply chain or e-Commerce website; failure to successfully manage and execute Pier 1s marketing initiatives; negative impacts from a failure to control merchandise returns and recalls; potential impairment charges on certain long-lived assets; Pier 1s access to adequate operating cash flow, trade credit, borrowed funds and capital to fund its operations and pay its obligations as they become due, including the impact of continued deterioration of Pier 1s financial performance or adverse trends or disruption in the global credit and equity markets; the highly competitive retail environment with companies offering similar specialty home merchandise; factors affecting consumer spending, including employment levels and disposable income, interest rates, consumer debt levels, fuel and transportation costs and other factors; an inability to operate in desirable locations at reasonable rental rates and to close underperforming stores at or before the completion
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