Luby’s modifies credit facility pricing, amends financial covenants

By Marisa Wong

Madison, Wis., Nov. 12 – Luby’s, Inc. entered into a second amendment on Nov. 7 to its credit agreement dated Aug. 14, 2013 and maturing Sept. 1, 2017 with Wells Fargo Bank, NA as administrative agent and Amegy Bank NA as syndication agent.

The second amendment modifies key financial bank covenants to provide for the company’s capital needs given the company’s trailing EBITDA. The adjusted covenants give the company more available credit, according to an 8-K filing with the Securities and Exchange Commission.

The amendment revises the interest rate to Libor plus an applicable spread that ranges from 250 basis points to 400 bps. The applicable spread is dependent on measures of the company’s financial performance.

The amendment also revises the lease adjusted leverage ratio to not more than 5.75 to 1.00 at all times during the first, second and third fiscal quarters of fiscal year 2015; 5.50 to 1.00 at all times during the fourth fiscal quarter of fiscal year 2015; 5.25 to 1.00 at all times during the first fiscal quarter of fiscal year 2016; 5.00 to 1.00 at all times during the second fiscal quarter of fiscal year 2016; and 4.75 to 1.00 at all times after that.

The debt service coverage ratio was modified to be not less than 1.10 to 1.00 at all times during the first, second and third fiscal quarters of fiscal year 2015; 1.25 to 1.00 at all times during the fourth fiscal quarter of fiscal year 2015 and the first and second fiscal quarters of fiscal year 2016; and 1.50 to 1.00 at all times after that.

The amendment adds the requirements that the company maintain a minimum net profit of not less than $1.00 for at least one of any two consecutive fiscal quarters, starting with the third fiscal quarter of 2016 and a minimum net profit of not less than $1.00 for any period of four consecutive fiscal quarters ending, starting with the fourth fiscal quarter of 2015 (for the fiscal year 2015).

In addition, there is a new requirement that the company not exceed $25 million in capital expenditures in any fiscal year.

The amendment includes as security for indebtedness under the credit agreement a security interest in, among other things, all personal property and revises the credit agreement to include all real property of the company and its subsidiaries.

Luby’s is a Houston-based operator of restaurants.

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