Item 1.01 Entry into a Material Definitive Agreement
On May 19, 2020, Kimball Electronics, Inc. (the “Company”) entered into a credit agreement (the “Credit Agreement”) among the Company, as borrower, certain subsidiaries of the Company, as guarantors, the lenders party thereto, JPMorgan Chase Bank, National Association, as Administrative Agent, and Bank of America, N.A., as Documentation Agent. The Credit Agreement has a maturity date of May 18, 2021 and provides for an unsecured 364-day multi-currency revolving credit facility in an aggregate amount of up to $30 million.
The revolving credit loans under the Credit Agreement may consist of, at the Company’s election, advances in U.S. dollars or advances in any other currency that is agreed to by the lenders. The proceeds of the loans are to be used for working capital purposes and general corporate purposes of the Company. A commitment fee on the unused portion of principal amount of the credit facility is payable at 50.0 basis points per annum.
The interest rate on borrowings is dependent on the type of borrowings and will be one of the following two options:
•the London Interbank Offered Rate (“LIBOR”) in effect two business days prior to the advance (adjusted upwards to reflect bank reserve costs) for such interest period as defined in the agreement, plus the Eurocurrency Loans spread of 2.125%; or
•the Alternate Base Rate (“ABR”), which is defined as the highest of the fluctuating rate per annum equal to the higher of
a.JPMorgan’s prime rate;
b.1/2% per annum above the Federal Funds Effective Rate (as defined in the Credit Agreement); or
c.1% per annum above the Adjusted LIBO Rate (as defined in the Credit Agreement);
plus the ABR Loans spread of 1.125%.
The Company’s financial covenants under the Credit Agreement, which are the same as the financial covenants under the existing credit agreement entered into with the above parties on July 27, 2018, require:
•a ratio of consolidated total indebtedness minus unencumbered U.S. cash on hand in the U.S. in excess of $15 million to adjusted consolidated EBITDA, determined as of the end of each of its fiscal quarters for the then most recently ended four fiscal quarters, to not be greater than 3.0 to 1.0, and
•a fixed charge coverage ratio, determined as of the end of each of its fiscal quarters for the then most recently ended four fiscal quarters, to not be less than 1.10 to 1.00.
The foregoing description of the Credit Agreement is only a summary and is qualified in its entirety by the Credit Agreement itself, a copy of which is attached to this Current Report on Form 8-K as Exhibit 10.1 and is incorporated herein by reference.