Section 1.01 Entering into a Material Definitive Agreement.
On August 23, 2022, Superior Group of Companies, Inc.a Florida company (the “Company”), has entered into a credit agreement (the “Credit Agreement”) between the Company, the national subsidiaries of the Company, as guarantors, the lenders parties thereto (the “Lenders” ), and PNC Bank, National Associationas administrative agent for the Lenders (the “Administrative Agent”), pursuant to which the Lenders provide the Company with senior secured credit facilities consisting of a revolving credit facility in an aggregate maximum principal amount of $125 million and a term loan in the aggregate principal amount of $75 million (collectively, the “Credit Facilities”) and the ability to apply for additional revolving credit or term loan facilities for an aggregate amount up to an additional $75 million, subject to obtaining additional commitments from the lender and fulfilling certain other conditions. The credit facilities will bear interest at a floating rate equal to the guaranteed overnight funding rate (“SOFR”) plus an adjustment of between 0.10% and 0.25% (depending on the applicable interest period) plus a margin between 1.0% and 2.0%. (based on the net leverage ratio of the Company). The Company’s net debt ratio is generally calculated as the ratio of (a) debt less unrestricted cash to (b) consolidated EBITDA for the last four quarters of the financial year ended. During the term of the revolving credit facility, the Company will pay a commitment fee on the unused portion of the revolving credit facility ranging from 0.125% to 0.250% (depending on the net leverage ratio of the Company). The credit facilities have a term of five years.
The Credit Agreement contains customary events of default and negative covenants, including but not limited to those governing indebtedness, liens, fundamental changes, investments, restricted payments (including dividends and related distributions), liquidations, mergers, consolidations or acquisitions, transactions and sales of affiliates. assets or subsidiaries. The credit agreement also requires the company to maintain a fixed charge coverage ratio of at least 1.25 to 1.0 and a net leverage ratio of no more than 4.0 to 1.0. The Credit Facilities are secured by substantially all of the Company’s operating assets as collateral, and the Company’s obligations under the Credit Facilities are guaranteed by all of its national subsidiaries. The Company’s obligations under the Credit Facilities may be accelerated upon the occurrence of an Event of Default as defined in the Credit Agreement.
Proceeds from the credit facilities were used in part to refinance the Company’s existing debt with Truist Bank under the second amended and restated credit agreement dated February 8, 2021 between the company and
Truist Bank (the “Truist Credit Agreement”).
Section 1.02 Termination of a Material Definitive Agreement.
On August 23, 2022in connection with the conclusion of the credit agreement as described in point 1.01, the company has terminated the Truist credit agreement and the indebtedness thereunder (consisting of a revolving line of credit of one maximum principal amount of $125 million (approximately $118.5 million
outstanding balance) plus term loans with a total outstanding balance of approximately $45.5 million on that date) has been fully reimbursed. The Company has not incurred any termination penalty in connection with the early termination of the Truist credit agreement.
A description of the material terms and conditions of the Truist Credit Agreement is incorporated herein by reference to Section 1.01 of the Company’s current Report on Form 8-K filed on February 10, 2021.
Item 2.03 Creation of a Direct Financial Obligation or Obligation Under an Off-Balance Sheet Arrangement of a Registrant.
As described in point 1.01, on August 23, 2022the Company and its national subsidiaries have entered into the Credit Agreement with the Lenders and the Administrative Agent.
The material terms and conditions of the Credit Facilities described in Section 1.01 are incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits:
10.1 Credit Agreement, dated August 23, 2022among Superior Group of Companies, Inc.the Guarantors part, the Lenders part, and
PNC Bank, National Associationas administrative agent of the Lenders.
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