CPI gets second default forbearance on $96.3 million credit agreement

By Caroline Salls

Pittsburgh, Jan. 4 - CPI Corp. entered into a second forbearance agreement with credit agreement administrative agent Bank of America, NA, according to an 8-K filed Friday with the Securities and Exchange Commission.

CPI said it owed $96.3 million under the loan agreement as of Dec. 20, including $76.2 million in unpaid principal, $138,000 in unpaid interest, $6 million in unpaid PIK obligations, $169,000 in letter-of-credit fees and $13.8 million in letters of credit.

According to the 8-K, credit agreement defaults included those related to reporting covenants, lease abandonments, the company's failure to reduce its outstanding borrowings to a level at or below revolving commitment limits on and after Dec. 1 and Dec. 10, its failure to satisfy the minimum period cumulative EBITDAR for the period of Oct. 14 to Nov. 10, its failure to satisfy the minimum weekly cumulative gross sales revenue for the periods of Dec. 2 to Dec. 8, Dec. 9 to Dec. 15 and Dec. 16 to Dec. 22 and its failure to pay amounts exceeding the minimum weekly cash balance for each week in the periods ended Nov. 10 through Dec. 22.

Under the forbearance agreement, the agent has agreed not to exercise its default-related rights and remedies through Jan. 18.

CPI said the lenders will continue to make revolving loans available in amounts and for purposes that are satisfactory to the agent, provided, however, that the outstanding revolving amounts cannot ever exceed $90 million.

In addition, the termination date of the credit agreement has been changed to the earlier of Jan. 18 or the termination of the second forbearance agreement from Dec. 31.

The company said the agreement also eliminates its ability to request or obtain any letters of credit, requires it to reduce the outstanding loan balance by amounts on deposit at U.S. banks that exceed $500,000, terminates the minimum weekly cash balance requirement and provides that pledged assets now include 100% of the total outstanding equity interests of any foreign subsidiary.

In connection with the forbearance agreement, a joinder agreement was executed by CPI Corp. and subsidiaries CPI Portrait Studios of Canada Corp. and CPI Canadian Images.

Under the joinder agreement, the Canadian guarantors each assumed the obligations of and became a grantor under a guaranty/collateral agreement.

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

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