Aaron’s restates credit facility for added commitments, better terms

By Marisa Wong

Morgantown, W.Va., Sept. 21 – Aaron’s, Inc. entered into a second amended and restated revolving credit and term loan agreement on Sept. 18 with SunTrust Bank as administrative agent to extend the maturity date, obtain a new term loan, increase revolving commitments and improve pricing.

The credit agreement amends and restates the company’s existing amended and restated revolving credit and term loan agreement dated April 14, 2014, according to an 8-K filed Thursday with the Securities and Exchange Commission.

The maturity date was extended to Sept. 18, 2022 from Dec. 9, 2019.

The amendment provides for a new $100 million term loan that will be used to refinance existing debt under the prior credit agreement’s term loan facility and increases the revolving credit commitments to $400 million from $225 million.

The revolver increase includes an increase to the existing letter of credit subfacility to $35 million. In addition, the amended revolver provides for an uncommitted incremental facility increase option that allows the company to request an increase in extensions of credit by an aggregate amount of up to $250 million.

There were no borrowings under the revolver at closing, the filing noted.

Interest is now equal to Libor plus a margin ranging from 125 basis points to 225 bps, depending on the ratio of the company’s total net debt to consolidated EBITDA.

The new interest rates reflect more favorable, reduced margins. The debt component of the ratio on which that margin is calculated, is reduced by unrestricted cash on hand of the company and its subsidiaries.

The amendment also releases some inactive subsidiaries from their guarantee obligations and modifies other terms and covenants.

On the amendment date Aaron’s used a portion of the proceeds from the restated credit facility, together with cash on hand, to pay the full principal balance of its loan and security agreement dated May 18, 2011 assumed in connection with the October 2015 acquisition of Dent-A-Med, Inc., d/b/a the HELPcard. The company paid all remaining balances related to and terminated the Dent-A-Med credit facility on Sept. 19.

Also on Sept. 18 the company entered into a sixth amendment to its loan agreement with SunTrust Bank dated April 14, 2014 with the company’s franchisees as borrowers.

The company amended the franchisee loan facility to reduce the maximum facility commitment amount to $85 million from $125 million and release inactive subsidiaries from their guarantee obligations.

The company reduced the maximum commitment primarily to lower the amount of fees due on the unused portion of the commitment.

Aaron’s is an Atlanta-based sales and lease ownership company and specialty retailer of consumer electronics, computers, residential and office furniture, household appliances and accessories.

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