Franchise Group gets $105 million term loan for Sears Outlet purchase

By Wendy Van Sickle

Columbus, Ohio, Oct. 23 – Franchise Group, Inc. entered into a credit agreement via Franchise Group Newco S, LLC as borrower on Wednesday that provides for a four-year $105 million first-priority senior secured term loan, according to an 8-K filing with the Securities and Exchange Commission.

Guggenheim Credit Services, LLC is the administrative agent.

Borrowings will bear interest at Libor plus 650 basis points with a 1.5% Libor floor.

Beginning on the quarter ending April 1, 2020, the loan must be repaid in quarterly installments of $2.5 million.

Additionally, the company is required to prepay the term loan with 75% of consolidated excess cash flow on an annual basis and with the net cash proceeds of some other customary events.

Financial covenants include a maximum consolidated total leverage ratio, a minimum consolidated fixed charge coverage ratio, a minimum consolidated liquidity requirement and a minimum borrowing base ratio.

The loan matures on Oct. 23, 2023.

Proceeds were used to help fund the purchase of the Sears Outlet segment and Buddy’s Home Furnishing Stores businesses from Sears Hometown and Outlet Stores, Inc. for $119.96 million in cash plus $11.34 million for certain transaction expenses and employee payments and insurance costs.

Formerly Liberty Tax, Inc., Franchise Group offers tax preparation services. The company is based in Virginia Beach, Va.

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