Kid Brands obtains waiver following financial covenant non-compliance

By Marisa Wong

Madison, Wis., April 9 - Kid Brands, Inc. entered into on Tuesday a waiver and fourth amendment to its credit agreement dated Dec. 21, 2012, according to an 8-K filing with the Securities and Exchange Commission.

Prior to the amendment, the company was not in compliance with the financial covenant pertaining to availability under the credit agreement for the month ended Feb. 28, the financial covenants pertaining to availability and gross sales for the month ended March 31 or the covenant requiring the delivery of annual financial statements within 90 days of the end of 2013, accompanied by a report and opinion of its auditors without a going-concern or other qualification or exception.

The company also anticipates that it may not be in compliance with both financial covenants for the month ending April 30.

In addition, trading of the company's common stock on the New York Stock Exchange was suspended as of March 31.

All of the above constituted, or may constitute, events of default under the credit agreement.

The company also expects to determine and disclose in its financial statements for 2013 that there is substantial doubt about its ability to continue as a going concern and that a related explanatory paragraph would be included in the report and opinion of the company's auditors for 2013. These going-concern events may also violate provisions of the credit agreement, the filing noted.

The amendment waived the existing events of default and any event of default or failure of any condition to lending resulting from the going-concern events and cures any breach related to failure of payment.

In addition, compliance with each of the availability and gross sales financial covenants is suspended until the month ending Aug. 31, and the amendment potentially facilitates an additional ability to borrow by reducing the availability block by $500,000, namely $3.5 million instead of $4 million, for a period of four months and increasing the permitted transit period for in-transit inventory for a period of four months.

In consideration for the waiver and amendment, the company is subject to a new monthly collateral coverage ratio of 1 to 1, interest rate margins applicable to both revolver tranches under the credit agreement were increased by 200 basis points, and the agent was granted specified company board of director's observation and participation rights (in a non-voting capacity).

Salus Capital Partners, LLC is the administrative agent under the credit agreement.

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

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