CODI

Business Context and Reporting Period

Company: Compass Diversified Holdings (CODI) and Compass Group Diversified Holdings LLC.
Reporting Date: December 19, 2025.
Event: Entry into a Fifth Amendment to Credit Agreement and Limited Waiver Agreement with Bank of America, N.A., and consenting lenders. This filing addresses ongoing financial covenant defaults and the recent Chapter 11 bankruptcy filing of subsidiary Lugano Holding, Inc. on November 17, 2025.

Key Financial Metrics and Debt Structure

Debt and Liquidity:

• Revolving Commitments: Reverted to $100,000,000.
• Interest Rates: SOFR loans bear term SOFR plus a margin of 1.50% to 3.25%; base rate loans bear base rate plus 0.50% to 2.25%. Margins are tied to the Consolidated Total Leverage Ratio.
• Financial Covenants: Revised for periods after March 31, 2025, covering Consolidated Total Leverage Ratio, Consolidated Senior Secured Leverage Ratio, and Consolidated Fixed Charge Coverage Ratio.

Operational Restrictions:

• Manager Fees: Restricted to $15,000,000 per fiscal quarter.
• Restricted Payments: Limited to $10,000,000 per fiscal quarter unless the Consolidated Total Leverage Ratio is $\le$ 4.50:1.00.
• Deleveraging: 100% of net cash proceeds from dispositions or deleveraging transactions must be used to repay debt.

Reporting Requirements:

• Bi-weekly delivery of a rolling 13-week cash flow forecast with variance analysis.
• Submission of an updated "Lugano DIP Budget" and related bankruptcy documentation.

Other Metrics: The filing text does not provide specific values for revenue, profit, cash flow, or current leverage ratios.

Material Changes Versus Prior Period

Waiver of Defaults: Lenders waived certain continuing events of default related to financial covenants and the Lugano subsidiary investigation.
Debt Terms: The agreement modifies interest rate margins and reinstates the $100 million revolving commitment.
Covenant Structure: Financial covenants have been revised for future periods, and new milestone fees are now contingent on leverage ratios remaining above 4.50:1.00 through March 31, 2027.

Guidance, Outlook, and Risks

Milestone Fees (Outlook): If the Consolidated Total Leverage Ratio is not less than 4.50:1.00 at the end of specific fiscal quarters, the Company must pay milestone fees to lenders:

• June 30, 2026: $5,000,000
• September 30, 2026: $6,500,000
• December 31, 2026: $8,000,000
• March 31, 2027: $9,500,000

Risks and Contingencies:

• Lugano Bankruptcy: Ongoing Chapter 11 proceedings for Lugano Holding, Inc. require specific budget approvals and consent for debtor-in-possession loans.
• Liquidity Constraints: Strict requirements on cash flow forecasting and mandatory debt repayment from asset sales limit financial flexibility.
• Default Risk: Failure to meet revised covenants or leverage thresholds could trigger further defaults or mandatory fee payments.

Investor Verification Checklist

• Verify the current Consolidated Total Leverage Ratio to assess exposure to milestone fees.
• Review the "Lugano DIP Budget" and status of the Lugano Chapter 11 bankruptcy filing.
• Confirm the specific revised thresholds for the Consolidated Fixed Charge Coverage Ratio and Senior Secured Leverage Ratio.
• Monitor bi-weekly cash flow forecasts for variances exceeding 10%.
• Assess the impact of the $15 million quarterly cap on management fees on operational strategy.