XML 34 R17.htm IDEA: XBRL DOCUMENT v3.24.1.u1
DEBT
 12 Months Ended
Feb. 03, 2024
Debt Disclosure [Abstract]  
DEBT DEBT
On November 16, 2021, the Company completed the refinancing of its previous $360.0 million asset-based revolving credit facility and previous $80.0 million term loan with a new lending group led by an affiliate of Wells Fargo Bank, National Association (“Wells Fargo”) by entering into a fourth amendment to our credit agreement, dated as of May 9, 2019 (as amended from time to time, the “Credit Agreement”), with the lenders party thereto (collectively, the “Credit Agreement Lenders”). The refinanced debt consisted of a $350.0 million asset-based revolving credit facility (the “ABL Credit Facility”) and a $50.0 million term loan (the “Term Loan”).
On June 5, 2023, the Company entered into a fifth amendment to its Credit Agreement, pursuant to which, among other things, (i) PNC Bank, National Association (“PNC Bank”) was added as a new lender, (ii) the ABL Credit Facility was increased to $445.0 million, (iii) the London InterBank Offered Rate (“LIBOR”) was replaced by the Secured Overnight Financing Rate (“SOFR”) as the interest rate benchmark, and (iv) the pricing grid for applicable margins on borrowings was updated. All other material terms and conditions of the Credit Agreement remained unchanged.
The Company became aware of an inadvertent calculation error contained in the June, July and August 2023 borrowing base certificates provided to the Credit Agreement Lenders under its Credit Agreement, all of which have since been remedied. While the Credit Agreement Lenders determined the calculation error resulted in certain technical defaults under the Credit Agreement (including the Company not being in compliance with certain debt covenants), the Company and the Credit Agreement Lenders entered into a Waiver and Amendment Agreement (the “Waiver Agreement”) on October 24, 2023, pursuant to which the Credit Agreement Lenders waived all of the defaults and the Company agreed to certain temporary enhanced reporting requirements and temporary restrictions on certain payments. These enhanced reporting requirements and restrictions will cease once the Company achieves certain excess availability thresholds. At no time prior to or following entering into the Waiver Agreement was the Company prevented from borrowing under the Credit Agreement in the ordinary course in accordance with its terms.
During the first quarter of Fiscal 2024, Mithaq became a controlling shareholder of the Company and this change of control triggered an event of default under the Credit Agreement, thus subjecting the Company to cash dominion by the Credit Agreement Lenders. Subsequently, the Credit Agreement Lenders agreed to forbear from enforcing certain other rights and remedies during a limited forbearance period. The Company then entered into financing agreements with Mithaq for an initial $78.6 million term loan, and subsequently, a separate $90.0 million term loan. On April 16, 2024, the Company and certain of its subsidiaries entered into a seventh amendment to the Credit Agreement (the “Seventh Amendment”) with the Credit Agreement Lenders that, among other things, provided a permanent waiver of the change of control event of default. As of the effective date of the Seventh Amendment, the ABL Credit Facility was reduced to $433.0 million and the Term Loan was fully repaid, and until the Company achieves certain excess availability thresholds, the Seventh Amendment preserved the temporary enhanced reporting requirements under the Waiver Agreement and continued to impose cash dominion. On May 2, 2024, the Company entered into a commitment letter with Mithaq for a Shariah-compliant $40.0 million senior unsecured credit facility. See “Note 18. Subsequent Events” of the Consolidated Financial Statements, “Item 8. Financial Statements and Supplementary Data” of this Form 10-K for further information.
ABL Credit Facility and Term Loan
As of February 3, 2024, the Company and certain of its subsidiaries maintained the $445.0 million ABL Credit Facility and the $50.0 million Term Loan with Wells Fargo, Truist Bank, Bank of America, N.A., HSBC Business Credit (USA) Inc., JPMorgan Chase Bank, N.A., and PNC Bank as lenders, and Wells Fargo, as Administrative Agent, Collateral Agent, Swing Line Lender and Term Agent. Both the ABL Credit Facility and the Term Loan would mature in November 2026.
The ABL Credit Facility included a $25.0 million Canadian sublimit and a $50.0 million sublimit for standby and documentary letters of credit.
Under the ABL Credit Facility, based on the amount of the Company’s average daily excess availability under the facility, borrowings outstanding bore interest, at the Company’s option, at:
(i)the prime rate per annum, plus a margin of 1.250% or 1.500%; or
(ii)the SOFR per annum, plus a margin of 2.000% or 2.250%.
The Company was charged a fee of 0.200% on the unused portion of the commitments. Letter of credit fees ranged from 1.000% to 1.125% for commercial letters of credit and ranged from 1.500% to 1.750% for standby letters of credit. Letter of credit fees were determined based on the amount of the Company’s average daily excess availability under the facility. The amount available for loans and letters of credit under the ABL Credit Facility was determined by a borrowing base consisting of certain credit card receivables, certain trade receivables, certain inventory, and the fair market value of certain real estate, subject to certain reserves.
Once the Company achieves a consolidated EBITDA of at least $200.0 million across four consecutive fiscal quarters, and based on the amount of the Company’s average daily excess availability under the facility, borrowings outstanding under the ABL Credit Facility would bear interest, at the Company’s option, at:
(i)the prime rate per annum, plus a margin of 0.625% or 0.875%; or
(ii)the SOFR per annum, plus a margin of 1.375% or 1.625%.
Letter of credit fees would range from 0.688% to 0.813% for commercial letters of credit and would range from 0.8750% to 1.125% for standby letters of credit. Letter of credit fees are determined based on the amount of the Company’s average daily excess availability under the facility.
For Fiscal 2023, Fiscal 2022, and Fiscal 2021, the Company recognized $24.2 million, $10.2 million, and $7.0 million, respectively, in interest expense related to the ABL Credit Facility.
The outstanding obligations under the ABL Credit Facility may be accelerated upon the occurrence of certain events, including, among others, non-payment, breach of covenants, the institution of insolvency proceedings, defaults under other material indebtedness, and a change of control, subject, in the case of certain defaults, to the expiration of applicable grace periods. The Company was not subject to any early termination fees. 
The ABL Credit Facility contained covenants, which include conditions on stock buybacks and the payment of cash dividends or similar payments, and a fixed-charge coverage ratio covenant, which only would become effective in the event that borrowings and other uses of credit exceeded the maximum borrowing availability (as reflected in the table below), based on the Company’s ability to maintain a certain amount of excess availability for borrowings (the “excess availability threshold”). These covenants also limited the ability of the Company and its subsidiaries to incur certain liens, to incur certain indebtedness, to make certain investments, acquisitions, or dispositions or to change the nature of its business.
Credit extended under the ABL Credit Facility was secured by a first priority security interest in substantially all of the Company’s U.S. and Canadian assets other than intellectual property, certain furniture, fixtures, equipment, and pledges of subsidiary capital stock, and a second priority security interest in the Company’s intellectual property, certain furniture, fixtures, equipment, and pledges of subsidiary capital stock.
The table below presents the components of the Company’s ABL Credit Facility as of the end of Fiscal 2023 and Fiscal 2022:
 February 3,
2024		January 28,
2023
(in millions)
Total borrowing base availability, net of the excess availability threshold, as applicable$258.4$363.8
Credit facility maximum, net of the excess availability threshold, as applicable400.5315.0
Maximum borrowing availability (1)
258.4315.0
Outstanding borrowings226.7287.0
Letters of credit outstanding—standby7.47.4
Utilization of credit facility at end of period234.1294.4
Availability (2)
$24.3 $20.6 
Interest rate at end of period8.1%5.9%
 February 3,
2024		January 28,
2023
(in millions)
Average end of day loan balance during the period$315.5$274.9
Highest end of day loan balance during the period$379.4$297.7
Average interest rate7.5%3.7%
____________________________________________
(1)Lower of the credit facility maximum and the total borrowing base availability, both net of the excess availability threshold.
(2)The sub-limit availability for letters of credit was $42.6 million at February 3, 2024, January 28, 2023, and January 29, 2022.
The Term Loan bore interest, payable monthly, at (a) the SOFR per annum plus 2.750% for any portion that was a SOFR loan, or (b) the base rate per annum plus 2.000% for any portion that was a base rate loan. The Term Loan was pre-payable at any time without penalty, and did not require amortization. For Fiscal 2023, Fiscal 2022, and Fiscal 2021, the Company recognized $4.0 million, $2.3 million, and $5.9 million respectively, in interest expense related to the Term Loan.
The Term Loan was secured by a first priority security interest in the Company’s intellectual property, certain furniture, fixtures, equipment, and pledges of subsidiary capital stock, and a second priority security interest in the collateral securing the ABL Credit Facility on a first-priority basis. The Term Loan was guaranteed by each of the Company’s subsidiaries that guaranteed the ABL Credit Facility and contained substantially the same covenants as provided in the ABL Credit Facility.
Both the ABL Credit Facility and the Term Loan contained customary events of default, which included (subject in certain cases to customary grace and cure periods) nonpayment of principal or interest, breach of covenants, failure to pay certain other indebtedness, and certain events of bankruptcy, insolvency or reorganization, such as a change of control. As of February 3, 2024 and January 28, 2023, unamortized deferred financing costs amounted to $2.4 million and $2.3 million, of which $2.2 million and $2.0 million related to the Company's ABL Credit Facility.
As described above, during the first quarter of Fiscal 2024, the Company entered into financing agreements with its new majority shareholder, Mithaq, and on April 16, 2024, among other things, the Company and certain of its subsidiaries entered into a Seventh Amendment to the Credit Agreement with the Credit Agreement Lenders. As of the effective date of the Seventh Amendment, the ABL Credit Facility was reduced to $433.0 million and the Term Loan was fully repaid. See “Note 18. Subsequent Events” of the Consolidated Financial Statements, “Item 8. Financial Statements and Supplementary Data” of this Form 10-K for further information.