Conn’s acquires Badcock; reconfigures bank loan debt

Chicago, Dec. 21 – In connection with Conn’s Inc.’s closing of the acquisition on Monday of W.S. Badcock LLC, the company modified existing credit agreements and added a term loan and security agreement, according to an 8-K filing with the Securities and Exchange Commission.

Relatedly, the acquisition of Badcock was an all-stock transaction with Conn’s issuing preferred stock for the furniture retailer.

Revolver

Badcock was added to the list of borrowers on Conn’s revolving credit agreement through a third amendment.

The amendment allows for the acquisition transaction, but also extends the revolver to Dec. 18, 2026.

Interest has been increased by 50 basis points to SOFR plus 300 bps to 375 bps.

The termination date of the covenant relief period was extended to April 30, 2025.

A long list of covenants were modified, including providing for certain amendments to the borrowing base, including modifying the inventory advance rate by removing the cap of 33.3% of revolving commitments and modifying the contract advance rate to equal the lesser of 80% of net eligible contract payments and 80% of the net fair market value of the owned contract portfolio.

Further, the amendment provides for increased reporting requirements; amends the minimum excess availability covenant to require, at all times during the term of the revolving credit agreement, availability under the revolver of no less than the greater of 17.5% of the borrowing base and $100 million.

Additionally, the amendment replaces the minimum liquidity covenant with a springing, minimum fixed charge coverage ratio of 1x, which shall only be tested to the extent availability under the revolving credit agreement is less than 20% of the borrowing base, and testing of such covenant shall continue until the occurrence of the first fiscal-quarter end where availability as of such date has been in excess of 20% of the borrowing base for 30 consecutive days.

Moreover, the amendment added a minimum EBITDA financial covenant; and increased the cap on revolver borrowings at any one time outstanding to $400 million, with step downs thereafter to $300 million.

JPMorgan Chase Bank, NA is the administrative agent.

JPMorgan, MUFG Bank, Ltd. and Regions Capital Markets are the joint lead arrangers and joint bookrunners.

MUFG Bank, Ltd. and Regions Bank are the co-syndication agents.

New term loan

The company also entered into a second-lien term loan and security agreement for $108 million with BRF Finance Co., LLC as administrative agent and collateral agent. BRF Finance is also the sole lead arranger and sole bookrunner.

The loan was fully drawn at closing and matures on Feb. 20, 2027.

Interest will be at SOFR plus 800 bps, subject to a 4.8% floor.

Quarterly amortization payments of $1.35 million are required.

Proceeds may be used to repay existing second-lien term loan borrowings with Pathlight Capital LP and working capital and other lawful purposes. The Pathlight credit facility was terminated, but had been scheduled to mature on Feb. 20, 2026.

Prepayment on the new term loan is permitted, without a premium or penalty.

The term loan has covenants that are comparable to the revolving credit agreement.

Amended delayed-draw

Badcock was also added as a borrower to the company’s delayed-draw term loan from July 31, 2023.

The maturity date of the term loan was extended to May 22, 2027.

Covenants were added, including a minimum EBITDA financial covenant.

There are also amendments related to warrants, common stock and shareholder approval.

Stephens Investments Holdings LLC is the administrative agent.

Conn’s is a furniture store chain based in The Woodlands, Tex.

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