Business Context and Reporting Period
This Form 8-K Current Report was filed by Compass Diversified Holdings (CODI) and its subsidiary, Compass Group Diversified Holdings LLC, on December 7, 2007. The filing discloses the entry into a material definitive agreement involving an amendment to the Company's existing Credit Agreement.
Key Financial Metrics and Debt Structure
The filing details a significant restructuring of the Company's credit facilities rather than reporting operational financial results such as revenue or profit.
- Revolving Line of Credit: Increased to $325 million, maturing on December 7, 2012.
- Term Loan: New $150 million term loan established and fully drawn down at closing, maturing on December 7, 2013.
- Repayment Terms: The Term Loan requires quarterly payments of $500,000 commencing March 31, 2008.
- Letters of Credit: Availability up to $100 million under the Revolving Line of Credit.
- Expansion Capacity: The Company may increase the Revolving Line by up to $25 million and the Term Loan by up to $150 million over the next two years, subject to lender approval.
- Interest Rates: Term Loans bear interest at LIBOR plus 4.0% (for LIBOR loans) or the greater of the Prime Rate or Federal Funds Rate plus 0.5%, plus 3.0% (for Base Rate loans).
Material Changes and Use of Proceeds
The amendment represents a material change to the Company's capital structure, expanding total available liquidity. The proceeds from the Term Loan and the Revolving Line of Credit are designated for the following purposes:
- Repayment of approximately $44 million of existing borrowings under the prior Credit Agreement.
- Payment of approximately $5 million in transaction fees and expenses.
- Pursuit of acquisitions, including add-on acquisitions for existing subsidiaries.
- Provision for future working capital and general corporate purposes.
Outlook, Risks, and Contingencies
The filing highlights specific risks associated with the new credit agreement. Upon the occurrence of an event of default, the Revolving Line of Credit may be terminated, and the Term Loan and all outstanding obligations may become immediately due and payable. Additionally, outstanding letters of credit may require cash collateralization. The filing notes that any such event could materially impair the Company's ability to conduct its business. The debt is secured by all assets of the Company, including equity interests in and loans to its subsidiaries.
Key Facts for Investor Verification
- Verify the total debt load post-amendment, noting the full drawdown of the $150 million Term Loan.
- Confirm the specific interest rate environment (LIBOR and Prime rates) applicable at the time of borrowing to assess current interest expense.
- Monitor the Company's acquisition activity to determine if the expanded credit facility is being utilized as intended for growth.
- Review the Company's compliance with covenants to avoid events of default that could trigger immediate repayment obligations.
- Note that this filing does not provide revenue, profit, or cash flow data for the period; those metrics are not present in this document.