On December 22, 2011, Orchard Supply Hardware, LLC, a subsidiary of Orchard Supply Hardware Stores Corp., and certain subsidiaries entered into an amendment and restatement agreement with JPMorgan Chase Bank, as administrative agent and collateral agent, amending and restating its senior secured term loan agreement, dated as of December 21, 2006 (as amended on January 28, 2011, the “term loan agreement,” and as amended by the term loan agreement, the “amended and restated term loan agreement”).

Pursuant to the term loan agreement, the lenders thereunder extended term loans to Orchard Supply in an aggregate principal amount of $200 million under a seven-year term loan facility.

The term loan agreement was amended and restated to, among other things:

  • extend the maturity of a portion or all of the term loans of each consenting lender to December 21, 2015, which lenders holding approximately 65% of the term loans agreed to;

  • increase the applicable interest rate margins for extended term loans to 4.75% for ABR loans and 5.75% for eurodollar loans;

  • impose an Adjusted LIBO Rate floor of 1.25% per annum and an Alternate Base Rate floor of 1.00% plus the one month Adjusted LIBO rate, in each case, for extended term loans;

  • impose pay-in-kind interest on extended term loans at a rate of 3.00% per annum compounded annually;

  • permit extensions of the maturity of the term loans that were not extended in connection with the term loan amendment (as so extended, the “future extended term loans”) and permit refinancing of the term loans (as so refinanced, the “refinancing term loans”); provided that the all-in-yield on extended term loans shall be increased to equal the yield on such future extended term loans or refinancing term loans to the extent the future extended term loans or refinancing term loans, as applicable, have a yield 25 or more basis points greater than the all-in-yield on the extended term loans;

  • permit the borrower to purchase loans outstanding under the term loan agreement on a non-pro rata basis at less than par pursuant to a modified reverse Dutch auction purchase offer; provided that such purchased loans must be canceled within ten Business Days of purchase;

  • require a prepayment equal to $34.4 million with respect to the extended term loans on the closing date of the term loan amendment;

  • require a mandatory prepayment with 75% of the net cash proceeds of any disposition by OSH Properties LLC that is not used to pay Real Estate Debt;

    The company also entered into a second amended and restated senior secured credit agreement with Wells Fargo Bank as ABL administrative agent and collateral agent. This amendment alters a credit agreement entered into as of January 29, 2010 (the ABL credit agreement), among the company, and Wells Fargo Retail Finance in order to consent to the increased pricing applicable to the extended term loans under the term loan amendment.

    The ABL amendment also amended the ABL credit agreement to, among other things:

  • require the borrower to satisfy a liquidity test in order to make voluntary prepayments of term loans or cash interest payments with respect to Qualified Subordinated PIK Debt;

  • amend the definition of Change in Control to update the pre- and post-IPO prongs with a reference to the spin-off of the company’s equity interests;

  • amend the definition of Interest Payment Date to require that interest be paid on the first day of January, April, July and October in accordance with the requirements of the operating systems of Wells Fargo, as ABL administrative agent;

  • provide the borrower with the ability to have Qualified Subordinated PIK Debt outstanding in exchange for term loans, subject to certain restrictions; and

  • require the payment of a customary fee to the lenders for amending the ABL credit agreement.