| Item 1.01. |
Entry into a Material Definitive Agreement. |
On July 19, 2022, certain subsidiaries of Party City Holdco Inc. (the “Company”) entered into a Seventh Amendment to ABL Credit Agreement (the “ABL Amendment”) among Party City Holdings Inc., a wholly-owned indirect subsidiary of the Company (“PCHI”), Party City Corporation, a wholly-owned direct subsidiary of PCHI (together with PCHI, the “Borrowers”), PC Intermediate Holdings, Inc., the direct parent company of PCHI (“PC Intermediate”), certain subsidiaries of the Borrowers, the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”), which amended that certain ABL Credit Agreement, originally dated as of August 19, 2015 (as amended from time to time, the “ABL Credit Agreement”), by and among the Borrowers, PC Intermediate, the subsidiaries of the Borrowers from time to time party thereto, the lenders from time to time party thereto, and the Administrative Agent.
Pursuant to the ABL Amendment, the aggregate commitments under the asset-based revolving credit facility under the ABL Credit Agreement were increased from $475,000,000 to $562,110,500 (collectively, the “ABL Facility”). Such increase includes the establishment of a new $17,110,500 asset-based first-in, last-out revolving tranche (the “FILO Facility”). The FILO Facility is similar in nature to the first-in, last-out facility that previously existed under the ABL Credit Agreement prior to the Fifth Amendment thereto in February 2021. Commencing in March 2023, the Borrowers will be required to make scheduled quarterly payments of the loans under the FILO Facility equal to 5.55% of the original principal amount of the FILO Facility as in effect on the date of the ABL Amendment (with a corresponding reduction to the aggregate commitments under the FILO Facility). The balance of the FILO Facility has the same final stated maturity date as the other loans under the ABL Facility, which is scheduled to occur in February 2026 (subject to a springing maturity at an earlier date, under certain circumstances, if the maturity date of certain other debt of PCHI has not been extended or refinanced).
The ABL Amendment replaced the London Interbank Offered Rate (“LIBOR”) as the interest rate benchmark under the ABL Credit Agreement with the forward-looking term rate based on the Secured Overnight Financing Rate, subject to a 0.10% credit spread adjustment (“Adjusted Term SOFR”). Pursuant to the ABL Amendment, outstanding loans under the ABL Credit Agreement bear interest at a rate per annum equal to the applicable margin plus, at the Borrowers’ option, either (a) an alternate base rate (“ABR”), which is the highest of (i) the Administrative Agent’s prime rate, (ii) the federal funds effective rate plus 0.50%, and (iii) Adjusted Term SOFR for a one-month tenor plus 1.00%, or (b) Adjusted Term SOFR for the applicable interest period. Other than with respect to borrowings under the FILO Facility, the rates for the applicable margin for borrowings under the ABL Facility remain unchanged, ranging from 0.50% to 0.75% with respect to ABR borrowings and from 1.50% to 1.75% with respect to Adjusted Term SOFR borrowings. The applicable margin for borrowings under the FILO Facility is 1.75% with respect to ABR borrowings and 2.75% with respect to Adjusted Term SOFR borrowings.
The ABL Amendment also modified certain other provisions of the ABL Credit Agreement, including, among other things, to make certain changes to the excess availability trigger for the springing fixed charge coverage ratio covenant in connection with the commitment increase under the ABL Facility. Pursuant to the ABL Amendment, PCHI must comply with such financial covenant if excess availability under the ABL Facility on any day is less than the greater of: (a) $46,000,000 (increased from $40,000,000) and (b) 10% of the Total Line Cap (as defined therein).
This description of the ABL Amendment does not purport to be complete and is qualified in its entirety by reference to the ABL Amendment, which is attached to this Current Report on Form 8-K as Exhibit 10.1 and is incorporated herein by reference.
As of July 21, 2022, the Borrowers had approximately $146,000,000 of available borrowing capacity under the ABL Facility, based on the borrowing base then in effect and the aggregate principal amount of borrowings and letters of credit then outstanding under the ABL Credit Agreement.