Item 1.01. Entry into a Material Definitive Agreement.
On December 31, 2020, Presentation Technologies, LLC, a subsidiary of Ashford
Inc. ("PTI"), and certain of its subsidiaries (collectively, the "Loan
Parties"), and Comerica Bank, a Texas banking association, amended that certain
credit agreement dated as of November 1, 2017, as amended (the "Credit
Agreement"), and certain of the loan documents delivered under the Credit
Agreement (collectively, the "Amendment").
As a result of the Amendment, the Credit Agreement now contemplates a $3.0
million senior secured revolving line of credit (the "Revolving Note") and a
$20.0 million senior secured term loan (the "Term Note"). The Amendment extended
the maturity date of PTI's obligations under the Revolving Note and Term Note to
January 1, 2024, with the potential for a further one-year extension at PTI's
option subject to satisfaction of certain conditions, including the absence of
defaults, payment of a one-time, permanent principal reduction of the Term Note
of not less than $2.5 million, and payment of an extension fee of 0.25% of the
sum of: (i) the face amount of the Revolving Note; and (ii) the outstanding
amount owed under the Term Note as of the date of PTI's election to extend.
Pursuant to the Amendment, PTI's obligations to comply with certain financial
and other covenants in the Credit Agreement were waived, adjusted, paused or
eliminated, as described below:
· PTI's failure to comply with the Leverage Ratio covenant for the fiscal
quarters ended June 30, 2020 and September 30, 2020 was waived, and the
Leverage Ratio covenant has been eliminated from the Credit Agreement;
· PTI's failures to comply with the Pre-Distribution Fixed Charge Coverage Ratio
and the Post-Distribution Fixed Charge Coverage Ratio for the fiscal quarter
ending September 30, 2020 were waived, and those covenants have been eliminated
from the Credit Agreement. Those covenants were replaced with a covenant,
commencing with the fiscal quarter ending March 31, 2023, that PTI maintain a
Fixed Charge Coverage Ratio of not less than 1.2 to 1.0, calculated as of the
end of each fiscal quarter for the four fiscal quarterly periods most recently
ended; and
· PTI's failure to comply with covenants to make timely payments of principal and
interest on indebtedness under the Credit Agreement for the month ending
December 31, 2020 and to remain solvent to continue to do business as a going
concern were waived, as were any other defaults under the Credit Agreement that
occurred and were directly related to and as a result of any of the foregoing.
In addition, the Amendment confirms that any direct material impact on the
financial results and operations of PTI and the other Loan Parties arising from
the March 13, 2020 declaration of the national emergency relating to COVID-19
and the federal, state and local measures related thereto, as disclosed to
Comerica, will not be deemed to constitute a material adverse effect on the Loan
Parties for purposes of the Credit Agreement.
As a result of the Amendment, amounts borrowed under the Revolving Note and the
Term Note will bear interest at Comerica's prime rate plus a margin of 1.25%,
with the margin increasing by 0.25% beginning on July 1, 2021 and at the
beginning of each successive quarter thereafter. PTI will pay a commitment fee
of 1.5% of the Term Note in installments, with the possibility that the last
$0.1 million installment, scheduled to be paid on December 31, 2022, be forgiven
if PTI's obligations under the Credit Agreement have been satisfied in full in
advance of that date. The Amendment suspended PTI's amortizing payment
obligations under the Term Note through December 2021. Commencing January 1,
2022, PTI will be required to make monthly payments under the Term Note of $0.2
million through June 2022, $0.25 million through December 2022, and $0.3 million
thereafter.
The Amendment required PTI to establish an operating reserve account with
Comerica in an initial amount equal to $3.0 million, with such amounts to be
applied to scheduled interest payments due under the Revolving Note and the Term
Note. PTI must replenish such amount quarterly in an amount necessary to service
interest expense and projected operating costs for the upcoming quarterly period
based on projections delivered by PTI to Comerica as part of an enhanced set of
financial reporting requirements established by the Amendment. Funds in the
operating reserve account may be released to PTI if it is able to: (i) maintain
a Fixed Charge Coverage Ratio of not less than 1.2 to 1.0 for two consecutive
fiscal quarters; and (ii) demonstrate average availability under the Revolving
Note of at least $1.0 million throughout the three-month period most recently
ended. The Amendment also imposed a post-closing obligation on PTI and the other
Loan Parties to establish a lockbox and deposit account, exclusively accessed
and controlled in each case by Comerica, with amounts deposited into each to be
applied daily against amounts owed to Comerica under the Revolving Note.
The descriptions of the Amendment and the Credit Agreement, the Term Note and
the Revolving Note, as revised thereby and described above, do not purport to
describe all of the terms of such documents and are qualified in their entirety
by the full text of the composite version of the Credit Agreement, the Term Note
and the Revolving Note, copies of which are filed as exhibits to this Current
Report on Form 8-K and are incorporated herein by reference.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information contained in Item 1.01 is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit Number
Description
10.1 Credit Agreement by and between Presentation Technologies, LLC and
Comerica Bank (composite version, reflects all amendments through
December 31, 2020)
10.2 Second Amended and Restated Term Note, dated December 31, 2020,
made by Presentation Technologies, LLC in favor of Comerica Bank
10.3 Second Amended and Restated Revolving Note, dated December 31,
2020, made by Presentation Technologies, LLC in favor of Comerica
Bank
104 Cover Page Interactive Data File (formatted in Inline XBRL and
contained in Exhibit 101)
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