BRC’s Authentic Brands enters ABL revolver, term loan, bridge loan

By Marisa Wong

Los Angeles, Aug. 10 – Authentic Brands LLC, a subsidiary of BRC Inc., and some subsidiaries of Authentic Brands entered into a credit agreement on Aug. 10 with PNC Bank, NA as administrative agent and collateral agent for an up to $75 million senior secured asset-based revolving credit facility, according to an 8-K filing with the Securities and Exchange Commission.

The ABL facility includes an up to $7.5 million letter-of-credit sub-facility.

Authentic Brands also entered into a credit agreement on Thursday with Whitehawk Capital Partners LP as administrative agent and collateral agent for a $50 million term loan and a $6 million bridge loan.

Obligations under the credit agreements are guaranteed by each borrower and each borrower’s direct and indirect, existing and future domestic subsidiaries.

The ABL credit facility is secured by a first priority lien on some deposit accounts, cash and cash equivalents, credit card payments, accounts receivable, inventory and other related assets of the guarantors and a second priority lien on substantially all of the guarantors’ other assets.

The obligations under the term loan are secured by a second priority lien on the ABL priority collateral and a first priority lien on substantially all of the other assets of the guarantors.

Each credit agreement requires the borrowers to maintain (i) consolidated EBITDA of at least $2.46 million for the fiscal quarter ending Sept. 30, with that amount increasing incrementally over the next 15 quarters to $40 million for the four fiscal quarters ending June 30, 2027 and each four fiscal quarter period ending after that until maturity; (ii) a fixed-charge coverage ratio of not less than 1.10 to 1.00, measured quarterly on a trailing 12 month basis, following the availability block release date; (iii) minimum liquidity of at least $15 million, which iss reduced to $7.5 million following the availability block release date; and (iv) minimum average liquidity of at least $9,375,000 following the availability block release date.

On the closing date, Authentic Brands used proceeds from the term loan and about $13.9 million of borrowings under the ABL facility to retire its revolving credit facility and real estate term loan with Regions Bank and the equipment financing facility with Regions Commercial Equipment Finance, LLC and Regions Equipment Finance Corp.

ABL facility with PNC

Under the terms of the ABL credit agreement, the amount available for advances is subject to a borrowing base, which is calculated by reference to the value of certain eligible deposit accounts, cash and cash equivalents, credit card payments, accounts receivable and inventory, offset by certain reserves.

The amount available for advances will be reduced by $15 million until the borrowers have maintained a fixed-charge coverage ratio of not less than 1.10 to 1.00 for two consecutive fiscal quarters following the closing date and no defaults or events of default are then continuing – the availability block release date.

PNC may also reduce the amount available for advances upon certain findings or if PNC determines that such reductions are necessary for other purposes.

Borrowings under the ABL facility bear interest at term SOFR plus a margin ranging from 260 basis points to 310 bps, in each case subject to a 25 bps reduction following the availability block release date.

The borrowers are also required to pay fees in connection with the ABL credit agreement, including an unused commitment fee based on the average daily unused portion of the ABL facility, equal to 37.5 bps on an annual basis.

The ABL facility matures on the earlier of Aug. 10, 2028 and the date that is 91 days prior to the scheduled maturity date of any other debt in excess of $2.5 million.

Term loan details

Borrowings under the term loan bear interest at term SOFR plus 850 bps, subject to a 3% term SOFR floor.

The bridge loan does not accrue interest until Nov. 8.

The term loan requires the borrowers to make quarterly principal repayments in an aggregate principal amount equal to (i) 1.25% of the original aggregate principal amount beginning with the fiscal quarter ending Sept. 30, 2024 through the fiscal quarter ending June 30, 2025; (ii) 2.5% of the original aggregate principal amount beginning with the fiscal quarter ending Sept. 30, 2025 through the fiscal quarter ending June 30, 2026; and (iii) 3.125% of the original aggregate principal amount beginning with the fiscal quarter ending Sept. 30, 2026 through the maturity date.

The term loan is also subject to mandatory prepayment (i) to the extent the outstanding obligations under the term loan exceed a borrowing base calculated by reference to the value of certain eligible intellectual property, equipment and real property, offset by certain reserves, and (ii) of up to 50% of excess cash flows beginning in 2026.

The borrowers may voluntarily prepay amounts outstanding under the term loan at any time, subject in some cases to a prepayment premium.

The term loan matures on the earlier of Aug. 10, 2028 and the date that is 91 days prior to the scheduled maturity date of any other debt in excess of $2.5 million.

The bridge loan matures on Nov. 8, 2023, provided that up to $1.6 million of the bridge loan may be extended to Dec. 8, 2023 subject to some conditions.

BRC is a coffee and media company based in Salt Lake City.

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