Middleby amends credit agreement to modify covenants, pricing tiers

By Sarah Lizee

Olympia, Wash., Aug. 17 – Middleby Corp. subsidiary Middleby Marshall Inc. amended its $3.5 billion five-year multi-currency credit agreement on Monday with Bank of America, NA as administrative agent to modify financial covenants and pricing tiers, according to an 8-K filing with the Securities and Exchange Commission.

The amendment is subject to closing conditions, including prepayment of term loan obligations under the existing credit agreement of at least $400 million using the proceeds of unsecured debt, including convertible notes or equity, or a combination of those.

The amendment will modify some covenants and definitions under the facility, including to permit some junior capital transactions, including convertible notes, and some hedging arrangements.

It will also modify the covenant restricting the incurrence of debt to allow the company to incur additional debt if, on a pro forma basis after giving effect to the incurrence of that debt, the leverage ratio of the company does not exceed 5.5 to 1.0 and the company is otherwise in compliance with the secured leverage ratio.

Also, it will replace the existing leverage ratio financial covenant with a secured leverage ratio financial covenant so that the secured leverage ratio may not exceed 3.5 to 1.0 as of the last day of any fiscal quarter of the company.

However, during the elevated covenant period lasting from the first day of the company’s fourth fiscal quarter of fiscal year 2020 and continuing through the last day of the company’s second fiscal quarter of fiscal year 2021 (unless Middleby Marshall elects to terminate that period subject to the satisfaction of a 4 to 1 leverage ratio test calculated as of the last day of any 12-month period ending during the elevated covenant period), that secured leverage ratio may not exceed 4.5 to 1.0 as of the last day of the company’s fourth fiscal quarter of fiscal year 2020, 4.5 to 1.0 as of the last day of the company’s first fiscal quarter of fiscal year 2021, 4.25 to 1.00 as of the last day of the company’s second fiscal quarter of fiscal year 2021.

If the elevated covenant period has ended, the secured leverage ratio may be adjusted to 4 to 1 for a four consecutive fiscal quarter period in connection with certain qualified acquisitions.

The amendment will also add three additional pricing levels to the commitment fee rate and Libor margin applicable if the leverage ratio is greater than or equal to 4 to 1 but less than 4.5 to 1.0, greater than or equal to 4.5 to 1.0 but less than 5 to 1 and greater than or equal to 5 to 1.

The amendment also lifts capacity for addbacks to EBITDA to a cap of 20% of EBITDA for certain costs, fees and expenses including, after giving effect to the first amendment, Covid-19 pandemic related expenses incurred on or after Jan. 1, 2020 and prior to the first day of the company’s third fiscal quarter of fiscal year 2022.

The amendment additionally adds a condition to each new borrowing under the credit agreement that the aggregate cash and cash equivalent investments of the company and its subsidiaries not subject to certain liens will not exceed $500 million, subject to certain exceptions.

The foodservice equipment company is based in Elgin, Ill.

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