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Revolving Credit Facilities
 12 Months Ended
Oct. 31, 2023
Revolving Credit Facilities  
Revolving Credit Facilities

6. Revolving Credit Facilities

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On June 26, 2023, Calavo and certain subsidiaries entered into a credit agreement (the “Credit Agreement”) by and among Calavo, certain subsidiaries of Calavo as guarantors, and Wells Fargo Bank, National Association, as agent and lender (“Agent”). The Credit Agreement provides for a revolving credit facility of up to $90.0 million (the “Revolving Loans”), along with a capex credit facility of up to $10.0 million (the “Term Loan”, and together with the Revolving Loans, the “New Credit Facility”).

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The initial proceeds of $36.8 million on the Revolving Loans were used to fully repay the outstanding $34.9 million, balance under Calavo’s previous revolving credit facility with Bank of America, N.A. and to pay related transaction fees and expenses, and following the Closing Date (June 26, 2023) may be used for working capital and other general corporate purposes.  For a period of one year following the Closing Date, Calavo may utilize the proceeds of the Term Loan to pay a certain percentage of the costs of certain equipment purchased by Calavo.

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Borrowings of the Revolving Loans under the Credit Agreement are asset-based and are subject to a borrowing base calculation that includes a certain percentage of eligible accounts receivable, inventory and equipment of Calavo, less any reserves implemented by Agent in its permitted discretion; provided that the equipment based portion of such borrowing base calculation will reduce monthly following the Closing Date.

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Borrowings under the Credit Agreement bear interest at a rate per annum equal to an applicable margin, plus, at Calavo’s option, either a base rate or a secured overnight financing rate (“SOFR”) term rate (which includes a spread adjustment of 0.10% and is subject to a floor of 0.00%). The applicable margin is (i) for Revolving Loans, 0.50% for base rate borrowings and 1.50% for SOFR term rate borrowings, and (ii) for Term Loan, 1.00% for base rate borrowings and 2.00% for SOFR term rate borrowings.  The New Credit Facility matures on June 26, 2028 (the “Maturity Date”).

Calavo may voluntarily prepay loans under the New Credit Facility, in whole or in part, without premium or penalty. Subject to the terms and conditions set forth in the Credit Agreement, Calavo may be required to make certain mandatory prepayments prior to the Maturity Date.

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The Credit Agreement contains negative covenants that, among other things, limit Calavo’s ability to: incur indebtedness; grant liens on its assets; enter into certain investments; consummate fundamental change transactions; engage in mergers or acquisitions or dispose of assets; enter into certain transactions with affiliates; make changes to its fiscal year; enter into certain restrictive agreements; and make certain restricted payments (including for dividends). Each of these limitations are subject to various conditions.  The Credit Agreement also contains a springing fixed charge coverage ratio financial covenant that is tested if the amount of the Revolving Loans available for Calavo to borrow under the New Credit Facility is less than 10% of the total revolving credit facility.

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The Credit Agreement also contains certain affirmative covenants and customary events of default provisions, including, subject to thresholds and grace periods, among others, payment default, covenant default, cross default to other material indebtedness, and judgment default.

As of October 31, 2023, we were in compliance with the financial covenants, and we expect to remain in compliance for the next 12-months from our issuance date. As of October 31, 2023, approximately $40.0 million was available for borrowing, based on our borrowing base calculation discussed above.

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The weighted-average interest rate under the Credit Facility was 7.1% at October 31, 2023.  Under the New Credit Facility, we had $35.0 million and $4.1 million outstanding related to the Revolving Loans and Term Loan, respectively, as of October 31, 2023. The future principal payments related to the Term Loan is approximately $0.6 million for fiscal year 2024, $0.7 million for fiscal year 2025, $0.7 million for fiscal year 2026, $0.7 million for fiscal year 2027, and $1.4 million for fiscal year 2028.

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In connection with the New Credit Facility, we temporarily posted cash collateral to satisfy certain collateral requirements as we transitioned banks providing letters of credit related to our workers compensation policies. As of October 31, 2023, we have recorded $0.8 million and $3.0 million as restricted cash and prepaid and other current assets, respectively, related to this transition.

The weighted-average interest rate under our previous credit facility with Bank of America was 4.9% at October 31, 2022.  Under this credit facility, we had $1.2 million outstanding as of October 31, 2022, and had standby letters-of-credit of $3.2 million as of October 31, 2022.