Item 1.01Entry into a Material Definitive Agreement.
On September 3, 2020, Monarch Casino & Resort, Inc. (the “Company”) entered into the Fourth Amended and Restated Credit Agreement with Wells Fargo Bank, N.A., as administrative agent and certain banks (the “Fourth Amended Credit Facility”). The Fourth Amended Credit Facility amends and restates the Company’s $250.0 million credit facility, dated as of July 20, 2016 (filed as Exhibit 10.04 to the Company’s Form 10-K filed on July 21, 2016) (the “Amended Credit Facility”). As of September 2, 2020, the Company had an outstanding principal balance of $191.3 million under the Amended Credit Facility; this balance, along with various costs related to the preparation and closing of the Fourth Amended Credit Facility, were carried into the Fourth Amended Credit Facility at closing, and classified as long-term debt.
The Fourth Amended Credit Facility extends the maturity date of the Amended Credit Facility from July 20, 2021 to September 3, 2023. In addition, the Fourth Amended Credit Facility increases the aggregate principal amount of the credit facilities to $270.0 million. The Company may use borrowings from the Fourth Amended Credit Facility to pay for costs to be incurred for the completion of the expansion project of Monarch Casino Black Hawk in Black Hawk, Colorado, for ongoing working capital needs and for general corporate purposes.
The $270.0 million Fourth Amended Credit Facility consists of: $200 million term loan (“Term Loan Facility”) and $70 million revolving credit facility (“Revolving Credit Facility”). On the terms and subject to certain conditions thereunder, the Company may request an increase of up to an additional $75.0 million under the Revolving Credit Facility. The Company is required to make quarterly principal payments under the Term Loan Facility, commencing on December 31, 2020, in an amount equal to (x) the percentage set in the Fourth Amended Credit Facility (i.e., 1.25% for the period from December 31, 2020 to September 30, 2021, and 2.50% for the period from December 31, 2021) multiplied by (y) $200.0 million. Commencing with the delivery of the compliance certificate for fiscal year 2021, the Company may be required to prepay borrowings under the Fourth Amended Credit Facility using excess cash flows for each fiscal year, depending on the Company’s leverage ratio.
The interest rate under the Fourth Amended Credit Facility is LIBOR (the London Interbank Offered Rate) plus a margin ranging from 1.75% to 3.25%, or a base rate (as defined in the Fourth Amended Credit Facility) plus a margin ranging from 0.75% to 2.25%. The applicable margins will vary depending on the Company’s leverage ratio. There will be a LIBOR floor of 0.50%. The Fourth Amended Credit Facility also provides for benchmark replacement mechanics in respect of the discontinuation of LIBOR.
The Company’s obligations under the Fourth Amended Credit Facility are secured by substantially all of the Company’s assets. The Fourth Amended Credit Facility includes customary covenants and events of default. Commencing on December 31, 2020, the Company should comply with the following financial covenants: maximum total leverage ratio, minimum fixed charge coverage ratio and minimum operational liquidity.
The foregoing summary of the Fourth Amended Credit Facility does not purport to be complete and is qualified in its entirety by reference to the Fourth Amended Credit Facility.