Unifi Inc., a major supplier of polyester fibers used to make many brands of sporting goods apparel, said amendments to a $150 million senior credit facility will give it more liquidity and flexibility.
The amendment pertains to a $100 million revolving credit facility and a $50 million term loan provided Unifi Inc and its subsidiary Unifi Manufacturing Inc. in May 2012 by a syndicate of lenders led by Wells Fargo Bank, according to a document filed with the Securities and Exchange Commission. The primary purposes of the amendment are to provide Unifi with increased liquidity by enabling it to reload the term loan back to $50 million; pay lower quarterly principal payments and fees; and exclude its share repurchases from calculation of a key financial ratio contained in loan covenants.
The original credit agreement contains a financial covenant that requires Unifi maintain a “fixed charge coverage ratio” on a monthly basis of at least 1.05 to 1.0, in the event its borrowing under the line fall below the greater of $10 million, or 15 percent, of the maximum revolver amount. The amendment, once effective, will change that threshold to the greater of $10 million or 20 percent of the maximum revolver amount. As of June 25, 2013 Unifi had excess availability of $42.2 million.
The amendment also excludes Unifi’s repurchases of its publicly traded shares from the calculation of the fixed charge coverage ratio, which represents the minimum ratio of EBITDA and other items to fixed costs that Unifi must maintain every month to comply with loan covenants.
Lenders stipulate fixed charge coverage ratios in their loan covenants to ensure creditors have enough cash on hand to pay their fixed expenses, such as principal, interest and lease payments.
Upon satisfaction of certain conditions, the amendment also resets how the lenders evaluate Unifi assets collateralizing the loan and enables Unifi to reduce quarterly principal payments on the term loan from $1.8 million.
