Business Context and Reporting Period
Company: Dave & Buster's Entertainment, Inc.
Filing Type: Form 8-K (Current Report)
Date: October 19, 2020
Context: The Company announced the commencement of a private offering of senior secured notes by its indirect subsidiary, Dave & Buster's, Inc. Concurrently, the Company entered into a Second Amendment to its existing Credit Facility, effective upon the issuance of the Notes.
Key Financial Metrics and Debt Structure
This filing focuses on debt restructuring and liquidity management rather than operational performance metrics. Specific revenue, profit, or cash flow figures for the period are not provided in this document.
- New Debt Offering: Private offering of senior secured notes (minimum aggregate principal amount of $425 million).
- Use of Proceeds: Repayment of the Term Loan Facility in full and partial repayment of outstanding loans under the Revolving Credit Facility.
- Revolving Credit Facility Maturity: Extended by two years to August 17, 2024.
- Interest Rates (Suspension Period): LIBOR plus 4.00% (with a 1.00% LIBOR floor) and an additional 1.00% utilization fee.
- Undrawn Fee (Suspension Period): 0.50% per annum.
- Liquidity Covenant: Minimum liquidity requirement of $150 million.
- Cash Sweep: Unrestricted cash exceeding $100 million must be applied to repay the Revolving Credit Facility.
Material Changes Versus Prior Period
The Second Amendment introduces significant modifications to the Credit Facility terms compared to the prior agreement:
- Covenant Suspension: Total leverage ratio and fixed charge coverage ratio tests are suspended until the earlier of the fiscal quarter ending April 30, 2022, or when specific financial thresholds are met.
- Leverage Ratios: Upon resumption of testing, the total leverage ratio will start at 4.75:1.00 (April 2022) and step down to 3.50:1.00 thereafter.
- Incremental Debt: Allows up to $50 million in incremental debt if the secured net leverage ratio is $\le$ 3.50:1.00, or unlimited amounts if the ratio is $\le$ 2.75:1.00.
- Reporting Requirements: Mandates monthly reporting of liquidity calculations and 13-week cash flow projections during the suspension period.
- COVID-19 Carve-out: The impact of the pandemic is excluded from the "Material Adverse Effect" definition until financial statements for the quarter ending April 30, 2023, are delivered.
Guidance, Outlook, and Risks
Management Commentary: The restructuring is designed to provide financial flexibility and extend the maturity of the Revolving Credit Facility. The effectiveness of the amendment is cross-conditioned on the successful issuance of the Notes.
Risks and Contingencies:
- Forward-Looking Statements: Actual results may differ materially from projections due to risk factors filed with the SEC.
- Covenant Compliance: Exceptions to various covenants (e.g., incurrence of debt, liens, restricted payments) remain unavailable until the Company demonstrates compliance with specific leverage and coverage ratios by April 30, 2023, or earlier at the Issuer's election.
- Increased Pricing: The Company faces higher interest rates and fees during the "Financial Covenant Suspension Increased Pricing Period" until compliance with financial covenants is demonstrated.
Key Facts for Investor Verification
- Verify the final closing amount of the senior secured notes offering (minimum $425 million).
- Monitor the monthly 13-week cash flow reports and liquidity covenant compliance ($150 million minimum).
- Track the Company's ability to meet the stepped-down leverage ratio targets starting in the fiscal quarter ending April 30, 2022.
- Confirm the full repayment of the Term Loan Facility and the remaining balance of the Revolving Credit Facility post-closing.
- Review future filings for the date when the "Financial Covenant Suspension Increased Pricing Period" ends to assess the reduction in borrowing costs.