The fully committed credit facility provides incremental liquidity and more flexible covenants compared to the company’s existing agreements.
“Our new credit facility provides us with the financial flexibility needed to capitalize on the increasing demand for our new products, build traction in key distribution channels, and facilitate the execution of our long-term growth strategy,” said Mark Messner, Summer Infant CEO.
The $60 million senior revolving credit facility with BofA will have a five-year term maturing on June 28, 2023, with interest accruing at the company’s option of either LIBOR plus an applicable margin of 1.75% or 2.00%, depending on average quarterly availability (as defined in the definitive agreement), or the bank’s base rate plus an applicable margin of 0.75% or 1.00%, depending on average quarterly availability. In addition, the BofA agreement has a $5 million letter of credit sub-line facility. As of June 28, 2018, the base rate on loans was 6.0% and the LIBOR rate was 4.125%. The revolving credit facility will be secured by a first priority lien on the company’s assets, other than assets secured by the term loan.
The $17.5 million term loan with Pathlight Capital will also have a five-year term and accrue interest at three-month LIBOR plus 9.00%. As of June 28, 2018, the interest rate on the term loan was 11.336%. The term loan will be secured by a first priority lien on the company’s intellectual property, equipment and interests in its subsidiaries and a second priority lien on the revolving credit facility assets, and amortize at 5.00% per year, payable quarterly, beginning December 1, 2018.
Proceeds from the credit facility will be used to refinance existing indebtedness, pay any transaction costs, and to finance ongoing working capital needs. The company’s prior credit facility had totaled $75 million, with a blended average interest rate in the first quarter of 2018 of 5.00%.
OceanArc Capital Partners acted as the company’s exclusive financial advisor for the transaction.
Based in Woonsocket, RI, Summer Infant is a global distributor of premium infant and juvenile products.