Key Tronic Corporation Closes on New Credit Facility to Aid With Expected Growth
Key Tronic Corporation (Nasdaq: KTCC) announced the closing of a new $93 million credit facility on August 14, 2020, aimed at supporting anticipated growth. This new five-year asset-based senior secured revolving credit facility replaces the previous agreement with Wells Fargo. The facility allows for an additional $25 million increase, subject to conditions. After settling existing debt, approximately $16 million remains available. The facility is secured by the company's assets and entails financial covenants including a fixed charge coverage ratio of at least 1.25:1.00.
- New credit facility of up to $93 million could support growth.
- Ability to increase the credit line by $25 million if needed.
- Approximately $16 million available post debt settlement.
- Financial covenants may restrict operational flexibility.
- Potential risks of default could lead to accelerated repayment.
SPOKANE VALLEY, Wash., Aug. 17, 2020 (GLOBE NEWSWIRE) -- Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced the closing of a new credit facility to aid with expected growth.
On August 14, 2020, Key Tronic Corporation (the “Company”) and certain of its domestic subsidiaries entered into a loan and security agreement (the “Loan Agreement”) among the Company, certain domestic subsidiaries (as co-borrowers or guarantors), and Bank of America, N.A., as agent, sole lead arranger, sole bookrunner, and a lender (the “Bank”). The Loan Agreement replaces the Company’s prior amended and restated credit agreement, as amended, with Wells Fargo Bank, N.A and certain other parties (with the related credit facility, the “Prior Credit Facility”). The Loan Agreement provides for a five-year asset-based senior secured revolving credit facility (the “Credit Facility”) of up to
Loans and letters of credit under the Loan Agreement are not permitted to exceed the lesser of (i) the aggregate commitment under the Credit Facility and (ii) a borrowing base, which is determined by, among other things, specified levels of certain eligible accounts receivable and eligible inventory of the Company and certain of its subsidiaries, subject to certain reserve requirements, as further described in the Loan Agreement. The Credit Facility has been used to pay-off the Prior Credit Facility and costs related to the Loan Agreement, and may be used to pay-off certain other existing debt, to issue letters of credit, and for other business purposes, including working capital needs. Based on the Company’s borrowing base and reserve requirements and after paying off the Prior Credit Facility and related fees and expenses relating to the Credit Facility, immediately following the closing of the Loan Agreement, there was approximately
The payment and performance of the Company’s and co-borrowers’ obligations under the Credit Facility (as well as certain cash management and bank product obligations that may be owing to the Bank or its affiliates) are guaranteed by certain of the Company’s domestic subsidiaries and are secured by first-priority security interests in a substantial portion of the Company’s and co-borrowers’ and guarantors’ existing and future assets, including accounts receivable and inventory.
Generally, the interest rate applicable to loans under the Loan Agreement will be, at the Company’s option: (i)(A) the base rate which is the highest of (1) the prime rate for the applicable day (as such rate is determined from time to time by the Bank), (2) the federal funds rate for the applicable day plus
The Company’s and co-borrowers’ right to obtain any loan or letter of credit under the Credit Facility is subject to compliance with customary funding conditions as specified in the Loan Agreement (both before and after giving effect to the applicable credit extension), including that, among other things, all representations and warranties in the Loan Agreement are accurate, no default or event of default exists, and there has been no material adverse change since the closing date. The Bank can generally accelerate repayment and other obligations and exercise rights to collateral under the Credit Facility upon the occurrence of an event of default, including failure to timely pay principal or interest, a material inaccuracy of a representation or warranty, violation of various covenants, certain cross-defaults, the occurrence of a change in control, bankruptcy events, breach of certain loan document provisions, certain ERISA events, and the entry of certain material judgments that are not stayed within a certain time period.
The Loan Agreement contains financial covenants as long as commitments or obligations are outstanding under the Loan Agreement, requiring the Company to maintain: (i) a fixed charge coverage ratio of at least 1.25 to 1.0, measured monthly on a trailing 12-month basis; and (ii) a cash flow leverage ratio of no greater than 6.00 to 1.00, which may be subject to adjustments for COVID-19 related cash expenses as approved by the Bank, measured monthly on a trailing 12-month basis. In addition, the Loan Agreement contains a number of other covenants that, among other things: (x) grant certain inspection rights to the Bank; (y) limit or restrict the Company’s and its subsidiaries’ cash management; and (z) limit or restrict the ability of the Company and its subsidiaries to incur additional liens, make acquisitions or investments, incur additional indebtedness, engage in mergers, consolidations, liquidations, dissolutions, or dispositions, pay dividends or other restricted payments, prepay certain indebtedness, engage in transactions with affiliates, and use proceeds.
In connection with entering into and as required by the Loan Agreement, the Company also entered into a
Other than the Loan Agreement, Credit Facility, and Equipment Loan Arrangement (and certain related banking relationships and arrangements), there are no material relationships as of the date hereof between the Company or any of its affiliates and the Bank.
| CONTACTS: | Brett Larsen | Michael Newman |
| Chief Financial Officer | Investor Relations | |
| Keytronic Corporation | StreetConnect | |
| (509) 927-5500 | (206) 729-3625 |
FAQ
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