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Item 1.01.
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Entry into a Material Definitive Agreement.
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Credit Agreement
On July 22, 2020, Steven Madden, Ltd. (the “Company”) entered into a $150 million revolving credit agreement (the “Credit Agreement”) with various lenders and Citizens Bank, N.A., as administrative agent (in such capacity, the “Agent”). The Credit Agreement replaces the Company’s existing credit facility provided by Rosenthal & Rosenthal, Inc. (“Rosenthal”). The Company intends to use the new revolving credit facility for general corporate purposes.
The Credit Agreement provides for a revolving credit facility scheduled to mature on July 22, 2025. The initial maximum availability under the revolving credit facility is $150 million, subject to a borrowing base consisting of certain eligible credit card receivables, accounts, inventory, and, subject to the satisfaction of certain conditions, in-transit inventory. Availability under the revolving credit facility is reduced by outstanding letters of credit. As of July 22, 2020, no revolving loans or letters of credit were outstanding under the Credit Agreement. The Company may from time to time increase the maximum availability under the Credit Agreement by up to $100 million if certain conditions are satisfied, including (i) the absence of any default under the Credit Agreement, and (ii) the Company obtaining the consent of the lenders participating in each such increase.
Borrowings under the Credit Agreement generally bear interest at a variable rate equal to, at the Company’s election, (i) LIBOR for the applicable interest period plus a specified margin, which is based upon average availability under the revolving credit facility from time to time, or (ii) the base rate (which is the highest of (a) the prime rate announced by Citizens Bank, N.A. or its parent company, (b) the sum of the federal funds effective rate plus 0.50%, and (c) the sum of one-month LIBOR plus 1%) plus a specified margin, which is based upon average availability under the revolving credit facility from time to time.
Under the Credit Agreement, the Company must also pay (i) a commitment fee to the Agent, for the account of each lender, which shall accrue at a rate equal to 0.40% per annum on the average daily unused amount of the commitment of such lender, (ii) a letter of credit participation fee to the Agent, for the account of each lender, ranging from 2.00% to 2.50% per annum, based upon average availability under the revolving credit facility from time to time, multiplied by the average daily amount available to be drawn under the applicable letter of credit, and (iii) a letter of credit fronting fee to each issuer of a letter of credit under the Credit Agreement, which shall accrue at a rate per annum separately agreed upon between the Company and such issuer.
The Credit Agreement contains various restrictions and covenants applicable to the Company and its subsidiaries. Among other requirements, availability under the revolving credit facility must, at all times, (i) prior to the occurrence of the permanent borrowing base trigger (as defined in the Credit Agreement), equal or exceed the greater of $22.5 million and 15% of the line cap (as defined in the Credit Agreement), and (ii) after the occurrence of the permanent borrowing base trigger, equal or exceed the greater of $15 million and 10% of the line cap. Other than this minimum availability requirement, the Credit Agreement does not include any financial maintenance covenants.
The Credit Agreement requires various subsidiaries of the Company to guarantee obligations arising from time to time under the revolving credit facility, as well as obligations arising in respect of certain cash management and hedging transactions. The Credit Agreement also requires the Company to guarantee its subsidiaries’ obligations under the revolving credit facility and in respect of certain cash management and hedging transactions. Subject to customary exceptions and limitations, all of the borrowings under the Credit Agreement are secured by a lien on all or substantially all of the assets of the Company and each subsidiary guarantor, including the assets included in the borrowing base. Certain additional subsidiaries of the Company may from time to time become borrowers or guarantors pursuant to the Credit Agreement.
The Credit Agreement also contains customary events of default. If an event of default under the Credit Agreement occurs and is continuing, then the Agent may, and at the request of the required lenders shall, terminate the loan commitments under the Credit Agreement, declare any outstanding obligations under the Credit Agreement to be immediately due and payable and/or require that the Company adequately cash collateralize outstanding letter of credit obligations. In addition, if, among other things, the Company or, with certain exceptions, a subsidiary thereof becomes the subject of voluntary or involuntary proceedings under any bankruptcy, insolvency or similar law, then the loan commitments under the Credit Agreement will automatically terminate, any outstanding obligations under the Credit Agreement will automatically become immediately due and payable, and the cash collateral required under the Credit Agreement for any outstanding letter of credit obligations will automatically become immediately due and payable.
Amended and Restated Deferred Purchase Factoring Agreement
On July 22,
2020, the Company also entered into an Amended and Restated Deferred Purchase Factoring Agreement (the “Factoring
Agreement”) among the Company, certain of the Company’s subsidiaries party thereto (collectively with the
Company, the “Madden Entities”), and Rosenthal. Pursuant to the Factoring Agreement, Rosenthal will serve as the
collection agent with respect to certain of the Madden Entities’ receivables and will be entitled to receive a base
commission of 0.20% of the gross invoice amount of each receivable assigned for collection, plus certain additional fees and
expenses, subject to certain minimum annual commissions. Rosenthal will generally assume the credit risk resulting from a
customer’s financial inability to make payment with respect to credit approved receivables. The initial term of the Factoring Agreement
is twelve months, subject to automatic renewal for additional twelve-month contract periods, and the Factoring Agreement may
be terminated at any time by Rosenthal or the Madden Entities on 60 days’ notice and upon the occurrence of certain
other events. The Madden Entities pledged all of their right, title and interest in, to and under the Factoring Agreement in
favor of the Agent to secure obligations arising under or in connection with the Credit Agreement.
The foregoing descriptions of the Credit Agreement and the Factoring Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the Credit Agreement and the Factoring Agreement, which are filed as Exhibit 10.1 and Exhibit 10.2, respectively, to this Current Report on Form 8-K and incorporated herein by reference.
PJ Solomon acted as financial advisor to the Company with respect to the Credit Agreement, and Foley & Lardner LLP acted as legal counsel to the Company with respect to the Credit Agreement and the Factoring Agreement.