Kid Brands gets waiver following leverage ratio non-compliance

By Jennifer Chiou

New York, Aug. 15 - Kid Brands Inc. obtained a waiver and amendment for its credit agreement with Bank of America, NA as administrative agent after it failed to be in compliance with the consolidated leverage ratio covenant, according to an 8-K filed with the Securities and Exchange Commission.

As announced in June 2011 when the company entered into the amended and restated credit agreement, covenants included a consolidated fixed-charge coverage ratio of 1.5:1 and a maximum consolidated leverage ratio of 3.25:1, stepping down to 3:1 for the quarter ending June 30, 2013, subject to certain conditions.

The company was not in compliance as of June 30, and on Aug. 13, the company and certain of its domestic subsidiaries executed the waiver and amendment of covenants.

The filing stated that the company's 2012 credit agreement provides for

• An aggregate maximum $52 million revolving credit facility, subject to a $47 million availability cap, which may be increased in $1 million increments up to a maximum of $5 million under certain circumstances;

• A $5 million sub-facility for letters of credit;

• A sub-facility for swingline loans in a maximum amount of $5 million; and

• A $23 million term loan.

Upon execution of the 2012 agreement, $23 million of the amount outstanding under the previously mentioned $175 million amended and restated five-year revolving credit facility was converted into the term loan, and the remaining amounts continued as outstanding under the 2012 revolver.

The company noted that its previous ability to increase the amount of its revolver by up to $35 million under specified conditions was eliminated from the 2012 facility.

The 8-K added that upon submission of the borrowing base certificate due on Sept. 20, the borrowers are required to make an immediate principal repayment for the term loan.

The 2012 facility will come due on April 1, 2014.

Borrowings under the revolver bear interest at Libor plus 175 basis points to 300 bps based on leverage.

For the 2012 term loan, the company will pay an in-kind interest rate of 2% beginning on Dec. 15, and the applicable margin is 800 bps on Libor loans. If the term loan and all other interest is paid in full by or on Dec. 15, the PIK interest will be waived.

Further covenant details

Under the terms of the 2012 credit agreement, the company is required to comply with the following financial covenants:

• A maximum consolidated leverage ratio for the trailing 12 months as of the end of each month in the following amounts: July 31 at 6.25 to 1.0; Aug. 31 at 7.75 to 1.0; Sept. 30 at 6.75 to 1.0; Oct. 31 at 6.50 to 1.0; Nov. 30 at 5.75 to 1.0; Dec. 31 at 4.50 to 1.0; Jan. 31, 2013 at 5.00 to 1.0: Feb. 28, 2013 at 5.00 to 1.0; March 31, 2013 at 4.25 to 1.0; April 30, 2013 at 5.00 to 1.0; May 31, 2013 at 4.25 to 1.0; June 30, 2013 at 3.75 to 1.0; July 31, 2013 at 4.00 to 1.0; Aug. 31, 2013 at 4:00 to 1.0; Sept. 30, 2013 at 3.50 to 1.0; Oct. 31, 2013 at 3.75 to 1.0; Nov. 30, 2013 at 3.75 to 1.0; and Dec. 31, 2013 and each trailing 12-month period thereafter at 3.25 to 1.0; and

• A minimum consolidated fixed-charge coverage ratio as of the end of each month in the following amounts: for the three months ended July 31 at 1.50 to 1.0; for the three months ending Aug. 31, at 1.50 to 1.0; for the three months ending Sept. 30 at 1.40 to 1.0; for the four months ending Oct. 31 at 1.30 to 1.0; for the five months ending Nov. 30 at 1.30 to 1.0; for the six months ending Dec. 31 at 1.60 to 1.0; for the seven months ending Jan. 31, 2013 at 1.25 to 1.0; for the eight months ending Feb. 28, 2013 at 1.25 to 1.0; for the nine months ending March 31, 2013 at 1.25 to 1.0; for the 10 months ending April 30, 2013 at 1.25 to 1.0; for the 11 months ending May 31, 2013 at 1.25 to 1.0; and for the 12 months ending June 30, 2013 and thereafter at 1.25 to 1.0.

On or before Sept. 15, the company is required to retain a financial advisor.

Kid Brands is an East Rutherford, N.J.-based designer, importer, marketer and distributor of infant and juvenile consumer products.

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