Deckers Outdoor Corp. and its subsidiary Tsubo, LLC tripled the amount they can borrow under a credit agreement with Comerica Bank to $60 million between now and November 30, 2011.
The companies entered a so-called “Amendment Number Two” amending a credit agreement entered in May 2010 by increasing the maximum availability under the agreement from $20 million to $60 million during the period commencing on Aug. 10, 2011 and ending on Nov. 30, 2011. During this period, amounts borrowed under the credit agreement will bear interest at Comerica's prime rate, plus 0.25% or, at the company's option, at the London Interbank Offered Rate, or LIBOR, plus 1.25%.
In addition, the amendment suspends the several financial covenants of Deckers Outdoor that kick in when the outstanding obligations under the credit agreement exceed $2,000,000, including minimum net worth and earnings requirements. It adds the following new financial covenants
- A requirement that the companies to maintain a ratio of the (i) sum of (x) 80% of Decker Outdoor’s and the Tsubo’s consolidated net accounts receivable, plus (y) 50% of Deckers Outdoor’s and Tsubo’s consolidated inventory, to (ii) the Decker Outdoor’s and Tsubo’s consolidated total secured funded indebtedness, as of the end of each fiscal quarter, commencing with the fiscal quarter ended Sept. 30, 2011, of no less than 1.10:1.00; and
- the requirement to maintain a ratio of (i) consolidated EBITDAR for the trailing four fiscal quarter period, to (ii) the sum of Decker Outdoor’s and Tsubo’s (x) consolidated interest expense, and
(y) consolidated rental expense during such period, as of the end of each fiscal quarter, commencing with the fiscal quarter ended Sept. 30, 2011, of no less than 2.25:1.00.
The amended credit agreement also increases the percentage fee payable by the company for certain letters of credit during the period of the agrement from 0.75% to 1.25%, and increases the maximum amount of net loans that the company can make to certain subsidiaries who are not parties to the credit agreement to $75,000,000 in the aggregate per calendar year.