Cabela's Inc. successfully completed the second amendment to its Second Amended and Restated Credit Agreement. The amendment allows the company to contribute up to $225 million of capital to World's Foremost Bank, the company's wholly-owned bank subsidiary, in calendar year 2010 plus up to $25 million of capital in any fiscal year.
The company's ability to make the $225 million capital contribution in 2010 is contingent on changes in accounting rules and regulatory guidelines. The company paid a fee of 50 basis points of the revolving commitment amount to the lending banks to facilitate the amendment. For accounting purposes this fee will be amortized over the remaining term of the credit facility, which expires June 30, 2012. The applicable margin associated with borrowings outstanding under the agreement was unchanged.
The company also announced that prior to execution of the amendment it had decreased its revolving credit facility to $350 million from $430 million. The credit facility is supported by a consortium of financial institutions led by U.S. Bank. Advances under the credit facility are used for general business purposes, including working capital support.
“We are pleased to have completed this transaction quickly and without significantly increasing our borrowing costs,” said Tommy Millner, Cabela's chief executive officer. “This amendment allows us to make capital contributions to World's Foremost Bank in 2010 due to the consolidation of securitizations onto our balance sheet required by regulatory and accounting changes.”
“Throughout 2009, we focused on strengthening our balance sheet, generating cash and reducing debt levels,” Millner said. “As a result of these improvements, as well as a significant reduction in the use of letters of credit by our vendors, we elected to reduce the facility by $80 million. Given that outstandings on our line of credit in 2009 peaked at only $168 million, we believe a $350 million line of credit is more than adequate for working capital purposes.”
