Item 1.01Entry into Material Definitive Agreement.
On September 1, 2020, Apex Global Brands Inc. (the "Company") entered into a
Fifth Amendment to Financing Agreement and Forbearance Agreement with its senior
secured lenders, Gordon Brothers Finance Company and Gordon Brothers Brands (the
"September 2020 Forbearance Agreement").
The Company reported Adjusted EBITDA for the 12 months ended February 1, 2020
that was below the required minimum in its senior secured credit facility. In
response, the Company entered into a series of extensions of its previous
forbearance agreements with its senior lender, and on September 1, 2020, the
Company entered into the September 2020 Forbearance Agreement whereby the senior
lenders have agreed not to enforce their rights to declare an event of default
and accelerate the payment of all amounts due under our senior secured credit
facility through December 31, 2020 resulting from our failure to meet the
Adjusted EBITDA threshold, the minimum cash requirement, and maintain a
borrowing base value that exceeds the outstanding balance of the term
loans. Beginning with September 1, 2020 and continuing through the term of the
Forbearance Agreement, interest and loan amortization payments, other than
approximately $85,000 per month, will not be paid in cash, but an equivalent
amount will be added to the principal amount of the term loans to be repaid in
future periods. The September 2020 Forbearance Agreement reduces the Adjusted
EBITDA threshold and required minimum cash balance during the forbearance
period, and it waives penalty interest during the forbearance period. The
September 2020 Forbearance Agreement requires that a portion of the Company's
federal income tax refunds expected to be received by the Company during the
forbearance period be used to pay in cash the interest previously accrued and
added to the principal amount of the term loans. After such federal income tax
refunds are received, monthly interest will again be required in cash, and no
further interest payment obligations will be deferred and added to the principal
amount of the term loans.
The September 2020 Forbearance Agreement requires the Company to continue to
evaluate strategic alternatives designed to provide liquidity to repay the term
loans under the senior secured credit facility. The September 2020 Forbearance
Agreement accelerates the maturity date of the Company's senior secured credit
facility from August 3, 2021 to March 31, 2021 or to December 31, 2020 if
certain milestones are not met.
Any failure by the Company to satisfy the requirements of the September 2020
Forbearance Agreement or any other breach under the senior secured credit
facility during the forbearance period would give the senior lenders the right
to terminate the September 2020 Forbearance Agreement, to declare an event of
default under the senior credit facility and accelerate the amounts due
thereunder.
The description of the September 2020 Forbearance Agreement set forth in this
Current Report on Form 8-K is intended to be a summary and does not purport to
be complete. As a result, such description is subject to, and qualified in its
entirety by reference to, the applicable document, which will be filed as an
exhibit to our next periodic filing.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
Reference is made to the disclosure regarding the September 2020 Forbearance
Agreement under Item 1.01 above, which is incorporate herein by this reference.
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