CPI gets credit facility forbearance after failure to meet covenants

By Sara Rosenberg

New York, May 30 - CPI Corp. entered into a forbearance agreement through July 12 as a result of non-compliance with the interest coverage and total funded debt to EBITDA ratios, according to an 8-K filed with the Securities and Exchange Commission on Wednesday.

Under the agreement, pricing on the facility was increased to base rate plus 300 basis points from base rate plus 200 bps, and the option to make Libor borrowings was eliminated.

In addition, letter-of-credits are now limited to $14 million, as opposed to $25 million, a forbearance EBITDA financial covenant was added and mandatory prepayments from net cash proceeds was increased to 100% from 50%.

Revolver commitments will be reduced by the amount of payments made with the proceeds of mandatory prepayments.

Also, the agreement eliminated the company's ability to make swing line loans and increase revolver commitments.

Furthermore, the company must continue to retain The Keystone Group as its financial adviser and provide lenders with monthly financial statements and compliance certificates and weekly cash projections.

The agreement was effective on May 24.

Bank of America is the administrative agent on the deal.

CPI is a St. Louis-based portrait studio operator.

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