|12 Months Ended|
Jan. 29, 2022
(9) Credit Agreements
The Company’s credit agreements consist of:
The Company’s foreign subsidiary, 1-2-3.tv has available unsecured lines of credit with Deutsche Bank AG and Bank für Tirol und Vorarlberg AG in the amount of EUR 2,000 (approximately $2,229 based on the January 29, 2022 exchange rate). Borrowings, if any, bear interest at 4.00% variable or the Euro Interbank Offered Rate (EURIBOR) plus 1.55%, per annum. As of January 29, 2022, no balances are outstanding under those credit facilities.
Extinguishment of PNC Credit Facility
On February 9, 2012, the Company entered into a credit and security agreement (as amended through February 5, 2021, the “PNC Credit Facility”) with PNC Bank, N.A. (“PNC”), a member of The PNC Financial Services Group, Inc., as lender and agent. The PNC Credit Facility, which included CIBC Bank USA (formerly known as The Private Bank) as part of the facility, provided a revolving line of credit of $70,000 and provided for a term loan on which the Company had originally drawn to fund improvements at the Company’s distribution facility in Bowling Green, Kentucky and subsequently to pay down the Company’s previously outstanding GACP Term Loan (as defined below). The PNC Credit Facility also provided an accordion feature that would allow the Company to expand the size of the revolving line of credit by another $20,000 at the discretion of the lenders and upon certain conditions being met. Maximum borrowings and available capacity under the revolving line of credit under the PNC Credit Facility were equal to the lesser of $70,000 or a calculated borrowing base comprised of eligible accounts receivable and eligible inventory.
Interest expense recorded under the PNC Credit Facility was $1,558, $3,497, and $3,758 for fiscal 2021, fiscal 2020, and fiscal 2019, respectively.
In July 2021, the Company terminated and repaid all amounts outstanding under the PNC Credit Facility term loan and revolving loan agreement. The aggregate amount paid to the lenders under the PNC Credit Facility was $405. As a result of the termination of the PNC Credit Facility, the Company recorded a $663 loss on extinguishment of debt in 2021.
8.50% Senior Unsecured Notes
On September 28, 2021, the Company completed and closed on its $80,000 offering of 8.50% Senior Unsecured Notes due 2026 (the “Notes”) and issued the Notes. The Company received related net proceeds of $73,700 after deducting the
underwriting discount and estimated offering expenses payable by the Company (including fees and reimbursements to the underwriters). The Notes were issued under an indenture, dated September 28, 2021 (the “Base Indenture”), between the Company and U.S. Bank National Association, as trustee (the “Trustee”), as supplemented by the First Supplemental Indenture, dated September 28, 2021 (the “Supplemental Indenture,” and the Base Indenture as supplemented by the Supplemental Indenture, the “Indenture”), between the Company and the Trustee. The Notes were denominated in denominations of $25.00 and integral multiples of $25.00 in excess thereof.
The Notes pay interest quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing on December 31, 2021, at a rate of 8.50% per year, and will mature on September 30, 2026.
The Notes are the senior unsecured obligations of the Company. There is no sinking fund for the Notes. The Notes are the obligations of iMedia Brands, Inc. only and are not obligations of, and are not guaranteed by, any of the Company’s subsidiaries. The Company may redeem the Notes for cash in whole or in part at any time at its option (i) on or after September 30, 2023 and prior to September 30, 2024, at a price equal to $25.75 per note, plus accrued and unpaid interest to, but excluding, the date of redemption, (ii) on or after September 30, 2024 and prior to September 30, 2025, at a price equal to $25.50 per note, plus accrued and unpaid interest to, but excluding, the date of redemption, and (iii) on or after September 30, 2025 and prior to maturity, at a price equal to $25.25 per note, plus accrued and unpaid interest to, but excluding, the date of redemption. The Indenture provides for events of default that may, in certain circumstances, lead to the outstanding principal and unpaid interest of the Notes becoming immediately due and payable. If a Mandatory Redemption Event (as defined in the Supplemental Indenture) occurs, the Company will have an obligation to redeem the Notes, in whole but not in part, within 45 days after the occurrence of the Mandatory Redemption Event at a redemption price in cash equal to $25.50 per note plus accrued and unpaid interest, if any, to, but excluding, the date of redemption.
The Company used all of the net proceeds from the offering to fund its closing cash payment in connection with the acquisition of 1-2-3.tv Invest GmbH and 1-2-3.tv Holding GmbH and any remaining proceeds for working capital and general corporate purposes, which may include payments related to the acquisition.
The offering was made pursuant to an effective shelf registration statement filed with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”) on August 5, 2021 and declared effective by the Commission on August 12, 2020 (File No. 333-258519), a base prospectus included as part of the registration statement, and a prospectus supplement, dated September 23, 2021, filed with the SEC pursuant to Rule 424(b) under the Securities Act.
Interest expense recorded under the 8.50% Senior Unsecured Notes was $2,712 for the year ended January 29, 2022.
Debt issuance costs, net of amortization, relating to the revolving line of credit were $5,925 and $0 as of January 29, 2022, and January 30, 2021, respectively and are included as a direct reduction to the 8.50% Senior Unsecured Notes liability balance within the accompanying consolidated balance sheets. The balance of these costs is being expensed as additional interest over the five-year term of the 8.50% Senior Unsecured Notes at an effective interest rate of 10.1%.
Siena Credit Facility
On July 30, 2021, the Company and certain of its subsidiaries, as borrowers, entered into a loan and security agreement (as amended through September 20, 2021, the “Loan Agreement”) with Siena Lending Group LLC and the other lenders party thereto from time to time, Siena Lending Group LLC, as agent (the “Agent”), and certain additional subsidiaries of the Company, as guarantors thereunder. The Loan Agreement has a three-year term and provides for up to a $80,000 revolving line of credit. Subject to certain conditions, the Loan Agreement also provides for the issuance of letters of credit in an aggregate amount up to $5,000 which, upon issuance, would be deemed advances under the revolving line of credit. Proceeds of borrowings were used to refinance all indebtedness owing to PNC Bank, National Association, to pay the fees, costs, and expenses incurred in connection with the Loan Agreement and the transactions contemplated thereby, for working capital purposes, and for such other purposes as specifically permitted pursuant to the terms of the Loan Agreement. The Company’s obligations under the Loan Agreement are secured by substantially all of its assets and the assets of its subsidiaries as further described in the Loan Agreement.
On September 20, 2021, the parties to the Loan and Security Agreement entered into a First Amendment to the Loan Agreement (the “First Amendment”), which revised the agreement to consent to and add the acquired entities of the 1-2-3.tv
acquisition as well as consent to the Bond Indenture. The parties also revised the definitions pertaining to “Consolidated Adjusted EBITDA” to include all Loan Parties defined in the agreement in the Senior Net Leverage Ratio, as well as clarifying the measurement thresholds pertaining to Minimum Liquidity.
On December 27, 2021, the Company entered into a Second Amendment to the Loan Agreement (the “Second Amendment”). The Second Amendment extends the deadline for the minimum liquidity calculation by 30 days. The Second Amendment did not modify or change any other terms and conditions of the Loan Agreement.
On February 25, 2022, the Company executed a Third Amendment to the Loan Agreement (the “Third Amendment”), which further defines how assets and liabilities are exchanged between 1-2-3.tv in Germany and Company in U.S., replaces LIBOR with SOFR, the secured overnight financing rate as administered by the Federal Reserve Bank of New York, which is not expected to have a material impact on our borrowing costs, and changes the date for the Q1 measurement date for the Company’s net debt ratio calculation to April 30, 2022.
On April 18, 2022, the parties to the Loan and Security Agreement entered into a Fourth Amendment to the Loan Agreement (the “Fourth Amendment”), which revised the agreement to consent to enter into a Securities Purchase Agreement and sell to Investor a convertible promissory note. Additional information contained in Note 22 – “Subsequent Events” in the notes to our consolidated financial statements.
Subject to certain conditions, borrowings under the Loan Agreement as of January 29, 2022 bear interest at 4.50% plus the London interbank offered rate for deposits in dollars (“LIBOR”) for a period of 30 days as published in The Wall Street Journal three business days prior to the first day of each calendar month. There is a floor for LIBOR of 0.50%. If LIBOR is no longer available, a successor rate to be chosen by the Agent in consultation with the Company or a base rate.
The Loan Agreement contains customary representations and warranties and financial and other covenants and conditions, including, among other things, minimum liquidity requirements. The Company is also subject to a maximum senior net leverage ratio. In addition, the Loan Agreement places restrictions on the Company’s ability to incur additional indebtedness or prepay existing indebtedness, to create liens or other encumbrances, to sell or otherwise dispose of assets, to merge or consolidate with other entities, and to make certain restricted payments, including payments of dividends to shareholders. The Company also pays a monthly fee at a rate equal to 0.50% per annum of the average daily unused amount of the credit facility for the previous month.
As of January 29, 2022, the Company had total borrowings of $60,216 under its revolving line of credit with the Agent. Remaining available capacity under the revolving line of credit as of January 29, 2022, was approximately $11,400, which provided liquidity for working capital and general corporate purposes. As of January 29, 2022, the Company was in compliance with applicable financial covenants of the Siena Credit Facility and expects to be in compliance with applicable financial covenants over the next twelve months.
Interest expense recorded under the Siena Credit Facility was $1,746 for the year ended January 29, 2022.
Deferred financing costs, net of amortization, relating to the revolving line of credit were $2,411 and $0 as of January 29, 2022, and January 30, 2021, respectively and are included within other assets within the accompanying consolidated balance sheets. The balance of these costs is being expensed as additional interest over the three-year term of the Siena Loan Agreement.
GreenLake Real Property Financing
On July 30, 2021, two of the Company’s subsidiaries, VVI Fulfillment Center, Inc. and EP Properties, LLC (collectively, the “Borrowers”), and the Company, as guarantor, entered into that certain Promissory Note Secured by Mortgages (the “GreenLake Note”) with GreenLake Real Estate Finance LLC (“GreenLake”) whereby GreenLake agreed to make a secured term loan (the “Term Loan”) to the Borrowers in the original amount of $28,500. The GreenLake Note is secured by, among other things, mortgages encumbering the Company’s owned properties in Eden Prairie, Minnesota and Bowling Green, Kentucky (collectively, the “Mortgages”) as well as other assets as described in the GreenLake Note. Proceeds of borrowings shall be used to (i) pay fees and expenses related to the transactions contemplated by the GreenLake Note, (ii) make certain payments approved by GreenLake to third parties, and (iii) provide for working capital and general corporate purposes of the Company. The Company has also pledged the stock that it owns in the Borrowers to secure its guarantor obligations.
The GreenLake Note is scheduled to mature on July 31, 2024. The borrowings, which include all amounts advanced under the GreenLake Note, bear interest at 10.00% per annum or, at the election of the GreenLake upon no less than 30 days prior written notice to the Borrowers, at a floating rate equal to the prime rate plus 200 basis points.
The Borrowers may prepay the GreenLake Note in full (but not in part) before July 30, 2022 (the “Lockout Date”) upon payment of a prepayment premium equal to the amount of interest that would have accrued from the date of prepayment through the Lockout Date. After the Lockout Date, the GreenLake Note may be prepaid in full or in any installment greater than or equal to $100 without any prepayment penalty or premium on 90 days’ prior written notice from Borrowers to GreenLake.
The GreenLake Note contains customary representations and warranties and financial and other covenants and conditions, including, a requirement that the Borrowers comply with all covenants set forth in the Loan Agreement described above. The GreenLake Note also contains certain customary events of default.
As of January 29, 2022, there was $28,500 outstanding under the Term Loan with GreenLake, all of which was classified as long-term in the accompanying condensed consolidated balance sheet. Principal borrowings under the term loan are non-amortizing over the life of the loan.
Interest expense recorded under the GreenLake Note was $1,793 for the year ended January 29, 2022.
Debt issuance costs, net of amortization, relating to the GreenLake Note were $1,682 and $0 as of January 29, 2022, and January 30, 2021, respectively and are included as direct reductions to the GreenLake Note liability balance within the accompanying consolidated balance sheets. The balance of these costs is being expensed as additional interest over the three-year term of the GreenLake Note at an effective interest rate of 11.4%.
On November 5, 2021 the Company issued a $20,800 seller note as a component of consideration for the acquisition of 1-2-3.tv. The seller note is payable annually in two equal installments in November 2022 and November 2023. The seller note bears interest at a rate of 8.50%. $20,062 is outstanding as of January 29, 2022. Interest expense recorded under the seller note was $406 for the year ended January 29, 2022.
On July 30, 2021, the Company issued a $10,000 seller note as a component of consideration for the acquisition of Synacor’s Portal and Advertising business. The seller note is payable in $1,000 quarterly installments, maturing on December 31, 2023. The seller note bears interest at rates between 6% and 11% depending upon the period outstanding. $8,000 is outstanding as of January 29, 2022. Interest expense recorded under the seller note was $278 for the year ended January 29, 2022.
The aggregate maturities of the Company’s credit agreements as of January 29, 2022 are as follows:
Currently, the Company’s principal cash requirements are to fund business operations and debt service, which consist primarily of purchasing inventory for resale, funding ValuePay installment receivables, funding the Company’s basic operating expenses, particularly the Company’s contractual commitments for cable and satellite programming distribution, funding debt service payments and the funding of necessary capital expenditures. The Company closely manages its cash resources and working capital. The Company attempts to manage its inventory receipts and reorders in order to ensure its inventory investment levels remain commensurate with the Company’s current sales trends. The Company also monitors the collection of its credit card and ValuePay installment receivables and manages vendor payment terms in order to more effectively manage the Company’s working capital which includes matching cash receipts from the Company’s customers to the extent possible with related cash payments to the Company’s vendors. ValuePay remains a cost-effective promotional tool for the Company. The Company continues to make strategic use of its ValuePay program in an effort to increase sales and to respond to similar competitive programs.
The Company’s ability to fund operations, debt service and capital expenditures in the future will be dependent on its ability to generate cash flow from operations, maintain or improve margins and to use available funds from its Siena Loan Agreement. The Company’s ability to borrow funds is dependent on its ability to maintain an adequate borrowing base and its ability to meet its credit facility’s covenants (as described above). Accordingly, if the Company does not generate sufficient cash flow from operations to fund its working capital needs, debt service payments and planned capital expenditures and meet credit facility covenants, and its cash reserves are depleted, the Company may need to take actions that are within the Company’s control, such as further reductions or delays in capital investments, additional reductions to the Company’s workforce, reducing or delaying strategic investments or other actions. The Company believes that it is probable its existing cash balances and its availability under the Siena Loan Agreement, will be sufficient to fund the Company’s normal business.
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef