Business Context and Reporting Period
Cohen & Company Inc. (the "Company") filed a Form 8-K Current Report on April 25, 2018. The filing discloses the entry into a material definitive agreement involving a new credit facility to support working capital and general liquidity.
Key Financial Metrics and Debt Structure
The Company, along with its subsidiaries, entered into a Loan Agreement with MB Financial Bank, N.A. Key terms include:
- Total Commitment: Up to $25 million.
- Interest Rate: LIBOR plus 6.0% per annum.
- Maturity Date: April 10, 2020.
- Commitment Fees: An upfront fee of $250,000 was paid. An undrawn commitment fee of 0.50% per annum applies to the unused portion.
- Collateral: Secured by a lien on all property of J.V.B. Financial Group Holdings, LP, including its 100% ownership interest in the Borrower.
Material Changes and Covenants
This filing represents a new direct financial obligation. The Credit Facility imposes specific financial covenants on the Borrower:
- Tangible Net Worth: Must not be less than $75 million through December 30, 2018, and $80 million thereafter.
- Debt-to-Net Worth Ratio: Outstanding loans may not exceed 0.22 times the Borrower's tangible net worth.
- Excess Net Capital: Must not be less than $40 million at any time.
- Restrictions: The agreement limits the ability to incur additional indebtedness, make certain loans/investments, and repay existing outstanding indebtedness.
Outlook, Risks, and Contingencies
The filing does not provide forward-looking guidance on revenue or earnings. The primary risk identified is the potential for an event of default, which would allow the Lender to declare all loans immediately due and payable. The Borrower is restricted from reducing the commitment below $25 million without specific notice and minimum reduction amounts ($1 million initially, then multiples of $500,000).
Investor Verification Checklist
- Verify the current status of the Borrower's tangible net worth against the $75 million covenant threshold.
- Confirm the Borrower's excess net capital remains above the $40 million requirement.
- Review the full text of the Loan Agreement (Exhibit 10.1) for specific definitions of "tangible net worth" and "excess net capital."
- Assess the impact of the 6.0% LIBOR spread on future interest expense relative to current market rates.
- Monitor compliance with restrictions on repaying existing indebtedness.