Aaron’s enters $250 million revolver, $25 million franchise loan

By Taylor Fox

New York, Dec. 1 – Aaron’s Co. Inc. and Aaron’s, LLC entered into a credit agreement on Nov. 9 providing for a $250 million senior unsecured revolving credit facility, according to an 8-K filing with the Securities and Exchange Commission.

The facility includes a $35 million sublimit for the issuance of letters of credit on customary terms and a $25 million sublimit for swingline loans on customary terms.

Aaron’s may increase the size of the revolver or add incremental revolving or term loan facilities in an aggregate amount of up to $150 million.

The revolver matures on Nov. 9, 2025.

Interest is equal to Libor plus an applicable margin of 150 basis points to 250 bps, based on total leverage.

The revolver contains financial covenants including a maximum total net leverage ratio of 2.50 to 1.00 and a minimum fixed-charge coverage ratio of 1.75 to 1.00.

In addition, if the total net leverage ratio exceeds 1.25 to 1.00 as of the end of any period of four consecutive fiscal quarters, the companies will be required to provide a first priority perfected lien on substantially all of their respective assets.

Aaron’s expects to use the revolver for working capital and capital expenditures, to finance future permitted acquisitions and for other general corporate purposes.

The revolver follows a separation and distribution agreement entered into with PROG Holdings, Inc. to transfer its Aaron’s business segment to Aaron’s Co. and distribute 100% of the outstanding shares of the company to PROG shareholders.

Truist Bank is administrative agent for the revolver. Truist Securities, Inc., BofA Securities, Inc. and JPMorgan Chase Bank, NA are joint lead arrangers and joint bookrunners. Bank of America, NA and JPMorgan Chase Bank, NA are co-syndication agents.

Also in connection with the separation and distribution, Aaron’s entered into on Nov. 17 a $25 million franchise loan facility, according to the 8-K filing.

The 364-day facility may be extended for additional 364-day periods.

The interest rate for the franchise loan is Libor plus 150 bps to 250 bps, based on total leverage.

The franchise loan contains financial covenants and springing security features similar to those under the revolver.

If the springing security feature is triggered, the liens securing the revolver and the franchise loan will be pari passu.

Truist Securities, BofA Securities and JPMorgan Chase Bank are joint lead arrangers and joint bookrunners for the franchise loan.

Aaron’s is an Atlanta-based lease-to-own furniture retailer.

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