Item 1.01 Entry into a Material Definitive Agreement.
As previously disclosed, on July 23, 2020, Ascena Retail Group,
Inc. (the “Company”) and certain of its subsidiaries (together with the Company, the “Debtors”) filed voluntary
petitions (the “Chapter 11 Cases”) under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”)
in the United States Bankruptcy Court for the Eastern District of Virginia (the “Bankruptcy Court”).
Also as previously disclosed, on July 23, 2020, prior to the
commencement of the Chapter 11 Cases, the Company entered into a backstop commitment letter (which was amended on September
9, 2020) with certain of the Company’s creditors and/or their affiliates (the “Backstop Parties”), pursuant to
which the Backstop Parties committed to provide the Company with a superpriority senior secured debtor-in-possession term loan
credit facility in an aggregate amount equal to approximately $312.3 million (the “DIP Term Facility”), on the terms
and conditions set forth therein, including the approval of the Bankruptcy Court.
In
addition, as previously disclosed, on August 14, 2020, the Company entered into a commitment letter (the “DIP ABL Commitment
Letter”) with certain lenders (the “DIP ABL Lenders”) under the Amended and Restated Credit Agreement, dated
as of January 3, 2011, as further amended and restated as of February 27, 2018 (as amended, restated, supplemented or otherwise
modified from time to time, the “Prepetition ABL Credit Agreement”), among the Company, certain of the Company’s
subsidiaries party thereto as borrowing subsidiaries, the other loan parties party thereto, the lenders party thereto, the issuing
banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent. Pursuant to the DIP ABL Commitment Letter, and on the
terms and conditions set forth therein, including the approval of the Bankruptcy Court, the DIP ABL Lenders committed to provide
the Company with a superpriority senior secured debtor-in-possession asset based revolving credit facility in an aggregate amount
of up to $400 million (the “DIP ABL Facility” and, together with the DIP Term Facility, the “DIP Facilities”),
pursuant to which the commitments and loans of the lenders party
to the Prepetition ABL Credit Agreement would convert into the DIP ABL Facility.
In connection with the Chapter 11 Cases, the Debtors filed a
motion for approval of the DIP Facilities [Docket No. 18], and on September 10, 2020, the Bankruptcy Court approved such motion
and entered an order approving the DIP Facilities and use of cash collateral on a final basis [Docket No. 587] (the “DIP
Order”).
DIP Term Credit Agreement
In
accordance with the DIP Order, on September 16, 2020, the Company and AnnTaylor Retail, Inc., as borrowers (collectively, the “DIP
Term Borrowers”), entered into a Senior Secured Super-Priority Debtor-in-Possession Term Credit Agreement (the “DIP
Term Credit Agreement”) with the lenders party thereto (the “DIP Term Lenders”) and Alter Domus (US) LLC, as
administrative agent. Capitalized terms used but not otherwise defined in this “DIP Term Credit Agreement” section
of this Current Report on Form 8-K have the meanings given to them in the DIP Term Credit Agreement. The DIP Term Borrowers’
obligations under the DIP Credit Agreement are secured by substantially all of the real and personal property of the DIP Term Borrowers
and each subsidiary of the Company that are guarantors (collectively, the “DIP Term Loan Parties”), subject to certain
exceptions.
The DIP Term Facility, which is governed by the DIP Term Credit
Agreement, consists of (i) $150.0 million in new money term loans (the “New Money DIP Loans”) and (ii) $162.3 million
of certain prepetition term loan obligations that have been rolled into the DIP Term Facility. The proceeds of the New Money DIP
Loans may be used, among other things, to pay certain costs, fees and expenses related to the Chapter 11 Cases and to prepay or
repay up to $50.0 million of borrowings under the ABL Credit Agreement, in all cases, subject to the terms of the DIP Term Credit
Agreement.
Upon the satisfaction of certain conditions set forth in the
exit facility term sheet attached to the DIP Term Credit Agreement, including the Effective Date having occurred, the DIP Term
Facility will convert on a dollar-for-dollar basis into first out term loans (the “First Out Exit Term Facility”) and
certain prepetition term lenders, including the DIP Term Lenders, will provide the Company with $87.7 million of last out term
loans (the “Last Out Exit Term Facility” and, together with the First Out Exit Term Facility, the “Exit Term
Facility”).
The maturity date of the DIP Term Facility is the date that
is the earliest of (i) six months after the Effective Date, (ii) the date of the substantial consummation (as defined in section
1101(2) of the Bankruptcy Code) of an Acceptable Plan, (iii) the date the Bankruptcy Court converts any of the Chapter 11 Cases
to a case under chapter 7 of the Bankruptcy Code, (iv) the date the Bankruptcy Court dismisses any of the Chapter 11 Cases,
(v) the date on which the DIP Term Loan Parties consummate a sale of all or substantially all of the assets of the DIP Term Loan
Parties pursuant to section 363 of the Bankruptcy Code or otherwise, and (vi) such earlier date on which the loans made under the
DIP Term Credit Agreement become due and payable by acceleration or otherwise in accordance with the terms of the DIP Term Credit
Agreement and the other Loan Documents.
Loans under the DIP Term Facility bear interest at a rate per
annum equal to (i) in the case of a base rate loan, the base rate (which is subject to a floor of 2.00%) plus 10.75% or (ii) in
the case of a Eurodollar rate loan, the adjusted London interbank offering rate (which is subject to a floor of 1.00%) plus 11.75%.
Upon the occurrence and during the continuance of an event of default under the DIP Term Facility, the Company will be subject
to a default rate of interest equal to 2.00% above the rate otherwise applicable.
Loans under the First Out Exit Term Facility will bear interest
at a rate per annum equal to (i) in the case of a base rate loan, the base rate plus 10.75% or (ii) in the case of a Eurodollar
rate loan, the adjusted London interbank offering rate (which is subject to a floor of 1.00%) plus 11.75%. Loans under the Last
Out Exit Term Facility will bear interest at a rate per annum equal to (a) prior to the second anniversary of the Effective Date,
(1) in the case of a base rate loan, the base rate plus 2.00% in cash and 8.00% in kind or (2) in the case of a Eurodollar rate
loan, the adjusted London interbank offering rate (which is subject to a floor of 1.00%) plus 2.50% in cash and 8.50% in kind and
(b) thereafter, (I) in the case of a base rate loan, the base rate plus 10.00% in cash or (II) in the case of a Eurodollar rate
loan, the adjusted London interbank offering rate (which is subject to a floor of 1.00%) plus 11.00% in cash. If any principal
of or interest on any loan or any fee or other amount payable under the Exit Term Facility is not paid when due, such overdue amount
will be subject to a default rate of interest equal to 2.00% above the rate otherwise applicable.
The
DIP Term Credit Agreement includes customary negative covenants for debtor-in-possession loan agreements of this type,
including covenants limiting the DIP Term Borrowers’ and their restricted subsidiaries’ ability to, among other things,
incur additional indebtedness, create liens on assets, make investments, loans, advances or guarantees, engage in mergers, consolidations,
sales of assets and acquisitions and pay dividends and distributions, in each case subject to customary exceptions for debtor-in-possession loan
agreements of this type. The DIP Term Credit Agreement also includes representations and warranties, mandatory prepayments, affirmative
covenants and events of default customary for financings of this type. 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 pursuant to chapter 11 of
the Bankruptcy Code, and certain other events related to the impairment of the DIP Term Lenders’ rights or liens granted
under the DIP Term Credit Agreement.
The foregoing description of the DIP Term Facility, the DIP
Term Credit Agreement and the Exit Term Facility does not purport to be complete and is qualified in its entirety by reference
to the DIP Term Credit Agreement, a copy of which is attached to this Current Report on Form 8-K as Exhibit 10.1 and is hereby
incorporated by reference in this Item 1.01.
DIP ABL Credit Agreement
In
accordance with the DIP Order, on September 16, 2020, the Company and certain of its subsidiaries, as borrowers (collectively,
the “DIP ABL Borrowing Parties”), and certain other subsidiaries of the Company, as guarantors (together with the DIP
ABL Borrowing Parties, the “DIP ABL Loan Parties”), entered into a Senior Secured Super-Priority Debtor-in-Possession
Credit Agreement (the “DIP ABL Credit Agreement”) with the DIP ABL Lenders and JPMorgan Chase Bank, N.A., as administrative
agent, which provides the Company with a superpriority senior secured
debtor-in-possession asset based revolving credit facility of up to $400 million in the aggregate with a $200 million letter of
credit sublimit. Capitalized terms used but not otherwise defined in this “DIP ABL Credit Agreement” section
of this Current Report on Form 8-K have the meanings given to them in the DIP ABL Credit Agreement. The obligations under the DIP
ABL Credit Agreement are secured by substantially all of the real and personal property of the DIP ABL Loan Parties, subject to
certain exceptions.
Upon the satisfaction of certain conditions set forth in the
DIP ABL Credit Agreement and the exit facility term sheet attached to the DIP ABL Credit Agreement, including the Effective Date
having occurred, the DIP ABL Facility will convert into a $400 million senior secured asset based revolving credit facility with
a $200 million sublimit for the issuance of letters of credit and a $30 million sublimit for swing line loans (the “Exit
ABL Facility” and, together with the DIP ABL Facility, the “ABL Facilities”). The proceeds of the ABL Facilities
may be used to pay certain costs, fees and expenses related to the Chapter 11 Cases, to repay certain prepetition indebtedness
and for working capital, among other things, in all cases subject to the terms of the credit agreements governing the ABL Facilities.
The maturity date of the DIP ABL Facility is the date that is
the earliest of (i) six months after the Effective Date, (ii) the date of the substantial consummation (as defined in section 1101(2)
of the Bankruptcy Code) of an Acceptable Plan, (iii) the date the Bankruptcy Court converts any of the Chapter 11 Cases to a case
under chapter 7 of the Bankruptcy Code, (iv) the date the Bankruptcy Court dismisses any of the Chapter 11 Cases, (v) the
date on which the DIP ABL Loan Parties consummate a sale of all or substantially all of the assets of the DIP ABL Loan Parties
pursuant to section 363 of the Bankruptcy Code or otherwise, and (vi) such earlier date on which the loans made under the DIP ABL
Credit Agreement become due and payable by acceleration or otherwise in accordance with the terms of the DIP ABL Credit Agreement
and the other Loan Documents.
Loans under the DIP ABL Facility bear interest at a rate per
annum equal to (i) in the case of a base rate loan, the base rate plus 1.50% or (ii) in the case of a Eurodollar rate
loan, the adjusted London interbank offering rate (which is subject to a floor of 0.75%) plus 2.50%. If any principal of or interest
on any loan or any fee or other amount payable under the DIP ABL Facility is not paid when due, such overdue amount will be subject
to a default rate of interest equal to 2.00% above the rate otherwise applicable.
Loans under the Exit ABL Facility will bear interest at a rate
per annum equal to (i) in the case of a base rate loan, the base rate plus an applicable margin ranging from 1.00% to 1.50%
or (ii) in the case of a Eurodollar rate loan, the adjusted London interbank offering rate (which is subject to a floor of
0.75%) plus an applicable margin ranging from 2.00% to 2.50%. The applicable margin is adjusted after the delivery of each compliance
certificate based upon the pricing grid in the credit agreement governing the Exit ABL Facility (the “Exit ABL Credit
Agreement”) and is subject to further adjustment based upon the achievement of a fixed charge coverage ratio as set forth
in the Exit ABL Credit Agreement. If any principal of or interest on any loan or any fee or other amount payable under the Exit
ABL Facility is not paid when due, such overdue amount will be subject to a default rate of interest equal to 2.00% above the rate
otherwise applicable.
The DIP ABL Credit Agreement includes customary negative covenants
for debtor-in-possession loan agreements of this type, including covenants limiting the DIP ABL Borrowing Parties’ and their
restricted subsidiaries’ ability to, among other things, incur additional indebtedness, create liens on assets, make investments,
loans, advances or guarantees, engage in mergers, consolidations, sales of assets and acquisitions and pay dividends and distributions,
in each case subject to customary exceptions for debtor-in-possession loan agreements of this type. The DIP ABL Credit Agreement
also includes representations and warranties, mandatory prepayments, affirmative covenants and events of default customary for
financings of this type. 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 pursuant to chapter 11 of the Bankruptcy Code, and certain other events related
to the impairment of the DIP ABL Lenders’ rights or liens granted under the DIP ABL Credit Agreement.
The foregoing description of the ABL Facilities does not purport
to be complete and is qualified in its entirety by reference to the DIP ABL Credit Agreement, a copy of which is attached to this
Current Report on Form 8-K as Exhibit 10.2 and is hereby incorporated by reference in this Item 1.01.