The Real Good Food Company, a frozen and refrigerated foods company focused on health and wellness, signed a definitive debt refinancing agreement with PMC Financial Services Group, which is expected to enhance the company’s liquidity position by up to $15 million.
Per the terms of the agreement, the company entered into a new $45 million second lien loan agreement with PMC (mezzanine debt). This new loan will pay down $20 million of existing term loans and a portion of the company’s existing revolving credit facility. After closing, capacity under the revolving credit facility will be $70 million, giving the company access to an incremental $15 million in liquidity.
This new second lien loan will mature Dec. 31, 2025 (concurrent with the rest of the credit facility), carrying a 9% payment-in-kind (PIK) interest and 9% cash interest. PMC will be issued penny warrants for a 5% equity interest in the company, which are exercisable between Dec. 31, 2025, and Nov. 20, 2033.
In addition, terms for the company’s equipment loan were amended to be interest only until May 31, 2024.
“We are pleased to announce this strategic debt refinancing with PMC Financial Services who has been our lender since 2016,” Bryan Freeman, executive chairman at The Real Good Food Company, said. “This debt refinancing, combined with $15.4 million in net proceeds from our recent equity offering, significantly strengthens our balance sheet and reduces our cash debt service by approximately $6 million annually, providing the company with the liquidity needed to execute upon our plan.
“As we rapidly expand the business in the fourth quarter and beyond, our margin improvements, increased liquidity, and lower cash debt service costs will play a key role in enabling us to achieve sustainable, profitable growth.”
