Business Context and Reporting Period
Brilliant Earth Group, Inc. filed this Form 8-K on May 24, 2022, reporting the refinancing of debt by its controlled subsidiary, Brilliant Earth, LLC (BE LLC). The filing does not provide operating results for a specific revenue or earnings reporting period.
Material Financing and Key Financial Metrics
| Item | Terms |
|---|---|
| Term loan facility | $65.0 million secured term loan |
| Revolving facility | Up to $40.0 million secured revolving credit facility |
| Maturity | May 24, 2027 |
| Collateral and guarantees | Substantially all assets of BE LLC and future material subsidiaries, subject to customary exceptions; future material subsidiaries are generally expected to guarantee the facilities. |
| Interest | SOFR plus a 0.125% adjustment and a 2.25%–2.75% margin, or alternate base rate plus a 1.25%–1.75% margin, depending on leverage; both subject to a 0.00% floor. |
| Revolver commitment fee | 0.25%–0.35% annually on unused commitments, depending on leverage. |
| Required term-loan amortization | 1.25% per quarter through June 30, 2024; 1.875% per quarter from September 30, 2024 through June 30, 2025; and 2.50% per quarter thereafter, with the remaining balance due at maturity. |
| Use of proceeds | Refinancing existing indebtedness, paying related fees and expenses, and funding working capital and general corporate purposes. |
The filing does not provide revenue, profit, cash flow, margin, cash balance, or liquidity figures.
Material Changes Versus the Prior Financing
- BE LLC terminated its September 30, 2019 credit agreement with Runway Growth Finance Corp. and replaced it with the new Credit Facilities.
- The prior agreement allowed up to $65.0 million of borrowings, had $58,157,894.74 outstanding at termination, and was scheduled to expire in October 2023.
- Repayment of the prior facility required a 1% prepayment fee plus a final payment fee; the filing does not state the amount of the final payment fee.
- The new facilities extend the stated maturity to May 24, 2027 and add a $40.0 million revolving borrowing capacity.
Covenants, Outlook, Risks, and Unusual Items
- Financial maintenance covenants begin testing for the quarter ending June 30, 2022.
- The consolidated fixed charge coverage ratio must be at least 1.25:1.00.
- The consolidated total leverage ratio must not exceed 4.00:1.00.
- BE LLC’s consolidated borrower leverage ratio must not exceed 3.00:1.00, subject to temporary increases to 4.00:1.00 for certain acquisitions.
- The facilities include customary affirmative and negative covenants and mandatory prepayment requirements related to asset sales, casualty events, and new debt, subject to exceptions.
- Secured borrowing, required amortization, variable interest rates, and covenant requirements create refinancing, interest-rate, liquidity, and covenant-compliance risks.
- The filing provides no management guidance or operating outlook.
Important Facts for Investors to Verify
- Actual amounts drawn under the $65.0 million term loan and $40.0 million revolving facility at and after closing.
- The applicable interest-rate margin and leverage ratios under the Credit Agreement.
- Cash available after refinancing, fees, prepayment charges, and other closing costs.
- Compliance with the fixed charge coverage and leverage covenants beginning June 30, 2022.
- The amount of the final payment fee paid under the terminated Runway Growth facility.
- Future principal amortization requirements and the source of repayment for the balance due in 2027.