Business Context and Reporting Period
This Form 8-K, filed on April 13, 2018, by BlueLinx Holdings Inc. (the "Company"), reports the completion of the acquisition of Cedar Creek Holdings, Inc. ("Cedar Creek") and the entry into new material definitive financing agreements to fund the transaction. The reporting date for the events is April 13, 2018.
Key Financial Metrics and Debt Structure
The filing details the establishment of new debt facilities rather than reporting operational financial metrics such as revenue or profit for a specific period.
- Revolving Credit Facility: A senior secured revolving loan and letter of credit facility of up to $600 million, with an uncommitted accordion feature allowing an additional $150 million (total potential capacity of $750 million). Letters of credit are available up to $30 million.
- Term Loan Facility: A senior secured term loan facility of $180 million.
- Interest Rates (Revolving): LIBOR plus 1.75% to 2.25% or Base Rate plus 0.75% to 1.25%, based on excess availability.
- Interest Rates (Term Loan): LIBOR (with a 1.00% floor) plus 7.00% or Base Rate (with a 2.00% floor) plus 6.00%.
- Maturity Dates: Revolving Credit Agreement matures October 10, 2022; Term Loan Agreement matures October 13, 2023.
- Collateral: Both facilities are secured by substantially all of the Company's and its subsidiaries' assets, including inventories, accounts receivable, and real property (for the Term Loan).
Material Changes and Transaction Details
The Company completed the acquisition of Cedar Creek, which became an indirect wholly owned subsidiary. The transaction was financed using proceeds from the new Revolving Credit Facility and Term Loan Facility. The Revolving Credit Agreement amends and restates a previous $335 million facility dated October 10, 2017. Proceeds were utilized to repay the existing facility, fund cash consideration for the merger, and cover transaction costs.
Guidance, Covenants, and Risks
The filing outlines specific financial covenants and risks associated with the new debt structures:
- Fixed Charge Coverage Ratio: Required to be maintained at 1.0 to 1.0 if excess availability falls below the greater of $50 million or 10% of the lesser of the borrowing base or maximum permitted credit.
- Net Leverage Ratio: The Term Loan Agreement requires a total net leverage ratio of 8.25 to 1.00 for the fiscal quarter ending September 29, 2018, with the required level reducing over the term of the loan.
- Prepayment Terms: The Revolving Credit Facility may be prepaid without penalty (excluding breakage costs). The Term Loan Facility may be prepaid subject to a "Prepayment Premium" if made prior to the fourth anniversary of the closing date.
- Financial Statements: Financial statements of the acquired business and pro forma financial information are not included in this filing but will be filed by amendment within 71 calendar days.
Key Facts for Investor Verification
- Verify the total cash consideration paid for Cedar Creek, as the filing states proceeds were used to fund a "portion" of the consideration but does not specify the total deal value.
- Confirm the specific utilization of the $600 million revolving facility and the $180 million term loan immediately following closing.
- Monitor the Company's ability to meet the 8.25 to 1.00 net leverage ratio covenant for the quarter ending September 29, 2018.
- Review the upcoming amendment to this 8-K (due within 71 days) for the pro forma financial impact of the acquisition.
- Assess the impact of the higher interest rate margins on the Term Loan (LIBOR + 7.00%) compared to the Revolving Credit Facility.