Business Context and Reporting Period
This Form 8-K filing by Dave & Buster's Entertainment, Inc. (the "Company") reports on events occurring on May 15, 2015. The filing details the entry into a new senior secured credit agreement by Dave & Buster's, Inc., an indirect subsidiary of the Company, to refinance existing debt obligations.
Key Financial Metrics and Debt Structure
The Company established a new 5-year credit facility (the "Facility") with an aggregate principal amount of $500 million, replacing a prior $480 million facility. The new Facility is structured as follows:
- Total Facility Amount: $500 million
- Term Loan A: $150 million
- Revolving Credit Facility: $350 million
- Letters of Credit Sub-limit: Up to $20 million
- Swing Line Loans Sub-limit: Up to $10 million
- Interest Rate: LIBOR plus a spread ranging from 1.50% to 2.25% per annum, based on a pricing grid tied to the total leverage ratio.
- Maturity Date: May 15, 2020
The filing does not provide specific revenue, profit, cash flow, or margin figures for the reporting period, as this is a current report focused on a material definitive agreement rather than a periodic financial statement.
Material Changes Versus Prior Period
The primary material change is the refinancing of the Company's debt structure:
- Debt Capacity Increase: The total available credit increased from $480 million under the Existing Facility to $500 million under the new Facility.
- Structure Change: The new agreement explicitly separates the funding into a $150 million term loan and a $350 million revolving facility.
- Incremental Capacity: The Company may increase the Facility by up to $150 million plus additional amounts, provided the Company maintains a secured leverage ratio of 2.75:1.00.
Guidance, Covenants, and Risks
The new credit agreement includes standard affirmative and negative covenants and financial maintenance requirements:
- Financial Covenants: The Borrower must maintain a maximum total leverage ratio and a minimum fixed charge coverage ratio.
- Restrictions: The agreement limits the ability to incur additional debt, pay dividends, make restricted payments, create liens, make investments, or engage in asset sales and mergers without lender consent.
- Events of Default: Includes nonpayment, material inaccuracies in representations, covenant violations, bankruptcy events, and changes of control. Upon default, loans may be accelerated, and commitments terminated.
- Use of Proceeds: Funds are designated to refinance the Existing Facility, pay related costs, and fund working capital and general corporate purposes.
Investor Verification Checklist
- Verify the specific terms of the pricing grid and the exact leverage ratio thresholds required to maintain the lowest interest rate spread.
- Review the attached Credit Agreement (Exhibit 10.1) for the precise definitions of "Total Leverage Ratio" and "Fixed Charge Coverage Ratio."
- Confirm the status of the $150 million incremental facility option and the conditions required to exercise it.
- Assess the impact of the new debt covenants on the Company's ability to pay dividends or pursue future acquisitions.