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Fred’s amends revolving facility to lift commitments to $225 million
By Marisa Wong
Morgantown, W.Va., Feb. 2 – Fred’s, Inc. amended its credit agreement dated April 19, 2015 with Regions Bank as administrative agent, collateral agent and lender and Bank of America, NA as lender to increase the revolving loan commitment to $225 million from $150 million, subject to a $30 million sublimit on letters of credit.
The amendment, entered into on Jan. 27, limits the amount that can be drawn on the revolver to percentages of the company’s credit card receivables, pharmacy receivables, inventory and pharmacy scripts, less reserves, according to an 8-K filed Thursday with the Securities and Exchange Commission.
The amendment also establishes a financial covenant requiring the company to maintain excess availability of at least the greater of $22.5 million and 10% of the aggregate revolving commitments.
Definitions, including “applicable margin” and “excluded subsidiary,” were revised, as were excess availability requirements for some acquisitions.
The limitation on dividends paid during any four consecutive quarters was reduced to $12.5 million from $20 million.
The amendment authorizes Regions Bank to conditionally take control of some company accounts for the purpose of directing payments to the administrative agent.
The amendment also revised some financial reporting obligations to the lenders.
In addition, the amendment allows for up to $15 million of borrowings under the revolver to be used in connection with the acquisition of up to 10 Rite Aid stores under an asset purchase agreement dated Dec. 19 among Fred’s, AFAE, LLC, Rite Aid Corp. and Walgreens Boots Alliance, Inc.
Fred’s is a Memphis, Tenn.-based operator of discount general merchandise stores and specialty pharmacy-only locations.
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