Latham Group, Inc. Form 8-K Summary
Business Context and Reporting Period
Latham Group, Inc. filed a Form 8-K dated February 23, 2022, reporting the entry into a new senior secured credit agreement by its wholly owned subsidiary, Latham Pool Products, Inc. The filing does not report operating results for a quarterly or annual period.
Financing and Key Financial Terms
- Revolving credit facility: $75 million senior secured multicurrency facility, including a letter-of-credit sub-limit. It matures on February 23, 2027 and may be used for general corporate and working capital needs.
- Term loan facility: $325 million senior secured U.S. dollar term loan, maturing on February 23, 2029.
- Interest rates: Revolver pricing is generally based on applicable benchmark rates plus margins of 3.50% or base-rate margins of 2.50%. Term loan pricing is based on Term SOFR plus margins of 3.75% to 4.00%, or the base rate plus margins of 2.75% to 3.00%, depending on leverage.
- Amortization: The revolver has no scheduled amortization. The term loan requires quarterly payments equal to 0.25% of its initial principal amount.
- Commitment fee: Initially 0.375% per year on unused revolving commitments, subject to adjustment based on the First Lien Net Leverage Ratio.
- The filing does not provide a clear amount of outstanding borrowings under the new facilities at the filing date beyond the stated initial facility amounts.
Material Changes Versus the Prior Comparable Period
The new Credit and Guaranty Agreement replaced and terminated the prior credit agreement dated December 18, 2018. Proceeds from the new borrowings were used to repay all outstanding obligations under the former agreement. The filing does not provide comparative revenue, profit, cash flow, margin, or liquidity figures.
Guidance, Covenants, Risks, and Unusual Items
- Mandatory prepayments may be required using 50% of excess cash flow and 100% of net proceeds from certain indebtedness, asset sales, casualty events, and condemnation events, subject to customary exceptions.
- If revolver usage exceeds 40% of commitments at a fiscal quarter-end, LIMC must maintain a maximum First Lien Net Leverage Ratio of 5.50:1.00.
- The agreement includes customary affirmative and negative covenants restricting additional debt, liens, investments, mergers, affiliate transactions, certain debt prepayments, restricted payments, and other distributions.
- Obligations are guaranteed by LIMC and certain wholly owned domestic subsidiaries and secured by substantially all assets of the borrower and guarantors, including receivables, equipment, intellectual property, and inventory.
- An event of default could result in termination of commitments and acceleration of all outstanding obligations.
- The filing provides no management guidance or operating outlook.
Important Facts for Investors to Verify
- Actual borrowings, available revolver capacity, letters of credit outstanding, and cash balances after the refinancing.
- The applicable interest-rate margins and benchmark exposure under the final credit agreement.
- Compliance with the 5.50:1.00 leverage covenant if revolver usage exceeds the specified threshold.
- Required amortization and potential mandatory prepayments, including any excess-cash-flow obligations.
- The company’s subsequent financial statements for debt balances, interest expense, liquidity, covenant compliance, and refinancing-related costs.