Varsity Brands/Hercules begins consent solicitation for floaters due 2024

Chicago, Feb. 2 – Varsity Brands Inc. and co-issuer Hercules Achievement, Inc. started a consent solicitation for the issuers’ senior secured first-lien floating-rate notes due 2024 (Cusips: 42704WAA8, U4261QAA3, 42704WAB6).

Amendments

The issuers are soliciting consents in relation to other debt, namely an ABL credit agreement, a first-lien credit agreement and a second-lien note purchase agreement

The issuers wish to increase the debt under the ABL credit agreement to $350 million from $180 million, with an additional 10% allowed for overadvances.

No proceeds from the ABL facility may be used to prepay second-lien obligations and the total amount of committed loans will not be more than $290 million for 90 consecutive days in any trailing 12-month period.

Secondly, the issuers want to increase the debt permitted under a first-lien credit agreement to $1.49 billion from $1.4 billion, plus incremental first-lien term loans up to a cap.

For the second-lien note purchase agreement, the solicitation addresses the maximum $620 million of second-lien incremental debt. The $620 million cap would be exclusive of capitalized interest that has been added to the principal plus second-lien incremental debt provided that second-lien obligations shall not be allowed to become pari passu with third amendment extended term loans.

The amendments would also reduce the optional redemption notice period.

Additionally, the maximum amount of debt under an ABL credit agreement as part of an intercreditor agreement would be increased to $411.25 million from $207 million. The revised maximum would additionally include unpaid interest, paid-in-kind amounts, reasonable and customary premiums, indemnification obligations, fees and expenses less the amount of permanent commitment reductions under the ABL credit agreement.

Also under the intercreditor agreement, the initial first-lien term credit agreement maximum will be increased to the sum of 115% of the sum of $1.49 billion plus additional amounts that may be incurred under certain sections of the initial credit agreement or similar corresponding sections in any additional first-lien debt facility or refinancing and certain refinancing costs.

For the initial second-lien note purchase agreement on the intercreditor agreement the issuers want to increase the permitted amount to the sum of 115% of the sum of $620 million and additional amounts that may be incurred under certain sections of the initial second-lien note purchase agreement or corresponding sections in any additional second-lien debt facility or refinancing and the amount of certain specified refinancing costs.

Separately, term priority collateral would no longer be required to be kept in a separate account.

The credit agreement amendments contemplated are expected to, among other things, extend the maturity of the existing term loans under the first-lien credit agreement from Dec. 15, 2024 to Dec. 15, 2026, revise the pricing of the extended term loans, extend the maturity of the existing notes under the second-lien note purchase agreement from Dec. 15, 2025 to April 14, 2027, and revise the pricing.

Interest would also be based on SOFR instead of Libor going forward.

Bain Capital is the sponsor.

Details

Consents from a majority of holders are required for the solicitation to be successful.

Cash payments of $5.00 per $1,000 of notes for which consents have been delivered will be paid to the noteholders as a consent fee, less the proportion of aggregate notes to be called for redemption in accordance with the indenture. For example, if no notes are called, the full $5.00 will be paid. If 25% are called, $3.75 will be paid or $2.50 if 50% of the notes are called. Notice of the final consent fee will be provided to holders on Feb. 8.

The record date is 5 p.m. ET on Feb. 1.

The solicitation started Thursday.

The solicitation expires at 5 p.m. ET on Feb. 10.

Ankura Trust Co., LLC is the trustee under the indenture.

D.F. King & Co., Inc. is the information and tabulation agent for the solicitation (888 605-1956, 212 269-5550, varsity@dfking.com)

Varsity Brands is a provider of sports, cheerleading and achievement-related products to schools. The company is based in Memphis, Tenn.

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