School Specialty gets $140 million five-year term loan at one-month Libor plus 625 bps

By Marisa Wong

Morgantown, W.Va., April 13 – School Specialty, Inc. entered into a $140 million loan agreement on April 7 with TCW Asset Management Co. LLC as the agent, according to an 8-K filed Thursday with the Securities and Exchange Commission.

The initial term loan draw at closing was $110 million. These proceeds, along with proceeds from a draw on an existing loan agreement, were used to repay the company’s previous term loan that had a remaining principal balance including accrued interest of $118.2 million.

The new term loan includes a delayed-draw feature allowing the company to draw up to an additional $30 million through April 7, 2019.

Initially, the term loan will bear interest at one-month Libor plus 625 basis points for the 2017 fiscal year.

The term loan matures on April 7, 2022.

In addition to scheduled quarterly principal repayments beginning June 30, the term loan requires prepayments with proceeds from asset sales and debt and equity sales and requires prepayments at specified levels from excess cash flow. The company is also permitted to make voluntary prepayments.

The loan agreement includes financial covenants relating to the company’s fixed-charge coverage ratio and net senior leverage ratio.

The term loan is secured by a first priority security interest in substantially all assets of the company and the subsidiary guarantors.

School Specialty terminated its previous term loan agreement dated June 11, 2013 with Credit Suisse AG as administrative agent upon entering into the new term loan.

Also on April 7, the company amended its existing loan agreement with Bank of America, NA and Bank of Montreal.

The amendment provides a new lower pricing tier of Libor plus 125 bps, a seasonal increase in the borrowing base of 5% of eligible accounts receivable for the months of March through August. The amendment also adds certain inventory in the borrowing base, which had previously been excluded.

The company also made some conforming changes in connection with its entry into the term loan. The amendment extends the maturity of the existing ABL facility to April 7, 2022, provided that the termination date will automatically become Feb. 7, 2022 unless the new term loan has been repaid, refinanced or discharged prior to that date.

Total fees incurred for the new term loan and the amendment to the ABL facility were estimated to be $4 million, collectively.

School Specialty is a Greenville, Wis.-based education company.

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