ITEM 2.04 Triggering Events That Accelerate or Increase a Direct Financial
Obligation or an Obligation under an Off-Balance Sheet Arrangement.
On March 2, 2023, SigmaTron International, Inc. (NASDAQ: SGMA), an electronic
manufacturing services company (the "Company") received an Event of Default and
Reservation of Rights from (i) J.P. Morgan Chase Bank, N.A. ("JP Morgan Notice")
dated March 2, 2023 with respect to that certain Amended and Restated Credit
Agreement dated as of July 18, 2022, (as amended, amended and restated, modified
or supplemented from time to time, the "Agreement") by and among the Company,
the other Loan Party thereto, and JPMorgan Chase Bank, N.A., as Lender
("Lender"), and (ii) TCW Asset Management Company, as Administrative Agent ("TCW
Notice") dated March 2, 2023 with respect to that certain Credit Agreement date
of July 18, 2022 (as amended, restated, supplemented or otherwise modified from
time to time, the "Credit Agreement" and together with the Agreement the "Credit
Agreements"), by and among the Company, WAGZ, Inc., a Delaware corporation
("WAGZ"), the financial institutions party thereto from time to time
("Lenders"), and TCW Asset Management Company (in its individual capacity,
"TCW"), as Administrative Agent for all Lenders (in such capacity, "Agent").
Capitalized terms used but not otherwise defined herein shall have the meanings
ascribed to them in the Agreement and Credit Agreement, as applicable.
The JP Morgan Notice indicated that the Lender was informed of the occurrence of
Events of Defaults under the Agreement as a result of the Company's failure to
maintain a Fixed Charge Coverage Ratio for the twelve month period ending
January 31, 2023 less than 1.10:1.0 as required under Section 6.12(a) of the
Agreement, and that an Event of Default has occurred and is continuing under
Section 7(d) of the Agreement (the "Covenant Defaults").
The TCW Notice indicated that Agent and Lenders were informed of the occurrence
of Events of Defaults and the continuation thereof under the Credit Agreement
under (i) clause (d) of Article VII of the Credit Agreement as a result of the
Company permitting the Total Debt to EBITDA Ratio for the twelve month period
ending on January 31, 2023 to be greater than 5.00:1.00 in violation of
Section 6.12(b) of the Credit Agreement and (ii) clause (g)(ii) of Article VII
of the Credit Agreement as a result of the occurrence of an "Event of Default"
(or equivalent term) under the ABL Credit Agreement or any other ABL Credit
Document (collectively, the "Existing Defaults" and together with the Covenant
Defaults, the "Defaults").
Each of the JP Morgan Notice and the TCW Notice (collectively, the "Notices")
indicated that the Lender, Lenders and Agent, respectfully (collectively, the
"Lender Parties") are in the process of evaluating the Defaults and reserve all
of the rights and remedies available under the Credit Agreements and any other
Loan Documents with respect thereto.
Receipt of the Notices by the Company has not resulted in an increase or
acceleration of the Company's obligations under each of the Credit Agreements.
As of the date of this Current Report on Form 8-K, the Lender Parties have not
exercised their respective rights or remedies under the Credit Agreements.
The Company is currently negotiating a forbearance agreement with each of the
Lender Parties to address the Defaults. Such negotiations may result in
increases in interest rates and other concessions with regard to the terms of
the forbearance agreements.
ITEM 2.06 Material Impairments.
In connection with the preparation and review of the financial statements for
the quarter ended January 31, 2023, the Company revised the financial
projections for its Pet Tech Segment. The revised projections resulted in a
triggering event for the Company's goodwill and long-lived asset groups
consisting of patents and trademarks. As a result, the Company concluded that
the carrying amount for goodwill and the long-lived asset groups was impaired
and not expected to be recovered. Accordingly, a non-cash pre-tax goodwill
impairment charge of approximately $13.3 million and a non-cash intangible
assets impairment charge of approximately $9.8 million would be recorded for the
Company's Pet Tech Segment for the quarter ended January 31, 2023.
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