American Seafoods reverses management bonuses to avoid covenant violation

New York, Oct. 31 - American Seafoods Group LLC said it reversed $1.2 million of management bonuses to avoid a covenant violation on its bank credit facility.

Because of increased production and slower sales, the Seattle company had twice as much inventory volume of ocean-harvested whitefish at Sept. 30 compared to a year earlier.

The extra inventory caused increased drawings on its revolving credit facility which resulted in increased leverage, according to a filing with the Securities and Exchange Commission.

As of Sept. 30, borrowings on the revolver were $39.0 million.

In order to avoid breaching covenants, American Seafoods said that during the third quarter it reversed the $1.2 million management bonus accrued through June 30. That change was in accordance with employment agreements and the company's general bonus policy, which specifies that performance bonuses are not payable for any year in which there is or would be a covenant violation.

Without the change, the company's leverage at Sept. 30 would have exceeded the maximum ratio permitted in the credit agreement, American Seafoods said.

The revolver is for up to $75 million. American Seafoods also has $90 million term loan A and a $230 million term loan B.

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