Item 1.01
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Entry into a Material Definitive Agreement
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Amendment to Working Capital Revolver Loan
On January 17, 2017, LSB Industries, Inc. (the Company) and each of the Companys subsidiaries signatory thereto entered into the Third
Amended and Restated Loan and Security Agreement (the Amendment), with the lenders identified on the signature pages thereof and Wells Fargo Capital Finance, LLC (Wells Fargo), as the arranger and administrative agent. The
Amendment, which is dated effective as of January 17, 2017, amends and restates the Companys existing working capital revolver (as so amended and restated, the Working Capital Revolver).
The Company and all of the Companys existing subsidiaries, other than Zena Energy LLC, are
co-borrowers
under
the Working Capital Revolver. The total revolver commitments as of the closing date are equal to $50 million. Interest accrues on outstanding borrowings under the Working Capital Revolver at a rate equal to, at the Companys election,
either (a) LIBOR for an interest period selected by the Company plus an applicable margin equal to 1.50% per annum or 1.75% per annum, depending on borrowing availability under the Working Capital Revolver or (b) Wells Fargos prime
rate plus an applicable margin equal to 0.50% per annum or 0.75% per annum, depending on borrowing availability under the Working Capital Revolver. In addition, unused line fees in an amount equal to 0.25% per annum on the average daily balance of
the unused revolver commitments under the Working Capital Revolver are payable by the Company, as well as customary fees in respect of letters of credit.
Advances under the Working Capital Revolver are based on specified percentages of eligible accounts receivable and inventories. The Working Capital Revolver
provides for a subfacility for the issuances of up to letters of credit in an aggregate amount not to exceed to $10 million, with the outstanding amount of any such letters of credit reducing availability for borrowings under the Working
Capital Revolver. The maturity date of the Working Capital Revolver is January 17, 2022, with a springing earlier maturity date (the Springing Maturity Date) that is 90 days prior to the maturity date of the Companys existing
senior notes (the Senior Notes), to the extent the Senior Notes are not refinanced or repaid prior to the Springing Maturity Date. The Working Capital Revolver does not include any amortization, and all borrowings under the Working
Capital Revolver are due on the relevant maturity date.
The Amendment also provides for a springing financial covenant (the Financial
Covenant), which requires that, if the borrowing availability is less than or equal to the greater of 10.0% of the total revolver commitments and $5 million, then the borrowers must maintain (a) with respect to relevant periods
ending on or prior to September 30, 2017, a minimum EBITDA in the amount set forth in the Amendment and (b) with respect to relevant periods ending after September 30, 2017, a minimum fixed charge coverage ratio of not less than
1.00:1.00. The Financial Covenant, if triggered, is tested monthly.
The Amendment includes other customary representations and warranties, affirmative
covenants, negative covenants and events of default. Upon the occurrence of events of default, the obligations under the Working Capital Revolver may be accelerated and the revolver commitments may be terminated.
Obligations under the Working Capital Revolver are secured by a first priority security interest in substantially all of the borrowers current assets,
including accounts receivable and inventory, with exceptions set forth in the Amendment and related loan documents.
The description above is only a
summary of the material provisions of the Amendment and the Working Capital Revolver and is qualified in its entirety by reference to a copy of the Amendment, which is filed as Exhibit 10.1 to this current report on Form
8-K
and incorporated by reference herein.
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