DEFA14A: Cracker Barrel Secures Amended Credit Facility, Enhances Financial Flexibility

Cracker Barrel Old Country Store, Inc. refinances its credit agreement, reducing the revolving credit facility to $550 million while adding a $250 million term loan facility and updating corporate bylaws.

Summary

• Cracker Barrel Old Country Store, Inc. entered into a Second Amended and Restated Credit Agreement on May 16, 2025.
• The new credit facility replaces the previous agreement from June 17, 2022.
• The new revolving credit facility has a maximum principal amount of $550 million, including a $25 million swingline subfacility and a $75 million letter of credit subfacility.
• A new delayed draw term loan facility (DDTL) of $250 million is available until June 15, 2026.
• The company can increase the new credit facility by up to $200 million, subject to securing additional commitments and maintaining a consolidated total leverage ratio of 3.50:1.00.
• Borrowings under the new credit facility will bear interest at either a base rate (prime rate, Federal Funds Rate plus 0.5%, or one-month Term SOFR plus 1.0%) plus an applicable margin, or the Term SOFR Rate plus an applicable margin.
• The applicable margin for base rate loans varies from 0.75% to 1.75%, while for Term SOFR Rate loans, it varies from 1.75% to 2.75%, depending on the company's consolidated total leverage ratio.
• Principal on the new credit facility is payable in full on the earlier of May 16, 2030, or if the company's 0.625% convertible senior notes due 2026 remain outstanding on March 16, 2026, then on such date, unless the company has sufficient cash availability.
• The company will repay the outstanding principal of any DDTL loans in quarterly installments after the DDTL Availability Expiration Date.
• The new credit facility is secured by guarantees from subsidiary guarantors and substantially all assets of the company and its subsidiaries, excluding real estate assets.
• The company must meet certain financial tests, including a consolidated total leverage ratio not to exceed 4.00:1.00 and a consolidated interest coverage ratio of at least 4.00:1.00.
• The new credit facility restricts the company's ability to incur debt and liens, merge, dispose of assets, make restricted payments, undertake transactions with affiliates, enter into sale-leaseback transactions, make certain investments, prepay or modify the terms of certain indebtedness, and modify the terms of certain organizational agreements.
• The company may declare and pay cash dividends and repurchase shares if there is no default and cash availability is at least $100 million, subject to certain leverage ratio conditions and limitations.
• The Board of Directors approved amendments to the company's bylaws, including adopting a majority vote standard in uncontested director elections, a proxy access provision, and provisions regarding the re-nomination of ineligible nominees and reimbursement of expenses related to shareholder nominations.
• The Board intends to seek advisory ratification of the Ineligibility Provision, the Reimbursement Provision, and the Proxy Access Provision at the 2025 annual meeting of shareholders.

Sentiment

Score: 7

Explanation: The document is neutral to positive. The refinancing of the credit facility and the addition of a term loan facility provide Cracker Barrel with increased financial flexibility. The amendments to the bylaws are generally positive for corporate governance.

Positives

• The new credit facility provides Cracker Barrel with continued access to capital for working capital and general corporate purposes.
• The delayed draw term loan facility offers flexibility for future investments.
• The accordion feature allows the company to increase the credit facility by up to $200 million, providing additional financial flexibility.
• The adoption of a majority vote standard in uncontested director elections and a proxy access provision may be viewed favorably by some shareholders.

Negatives

• The new revolving credit facility is smaller than the previous one ($550 million vs. $700 million).
• The new credit facility places restrictions on the company's ability to incur debt, dispose of assets, and make certain investments.
• The company must meet certain financial tests, including maintaining specific leverage and coverage ratios.
• The Board of Directors adopted the Ineligibility Provision and the Reimbursement Provision in response to feedback received from shareholders prior to the Company's 2024 annual meeting of shareholders, which may be viewed negatively by some shareholders.

Risks

• Failure to comply with the financial covenants could result in an event of default and acceleration of the debt.
• The restrictions on the company's ability to incur debt and make investments could limit its growth opportunities.
• The potential acceleration of the debt if convertible notes remain outstanding on March 16, 2026, could create financial pressure.
• The Ineligibility Provision and the Reimbursement Provision may be viewed negatively by some shareholders.

Future Outlook

The company intends to seek non-binding, advisory ratification of the Ineligibility Provision, the Reimbursement Provision and the Proxy Access Provision from the shareholders of the Company entitled to vote at the 2025 annual meeting of shareholders.

Management Comments

• The Board believes the Ineligibility Provision and the Reimbursement Provision, coupled with a majority voting standard and the Proxy Access Provision, represent a reasonable, balanced, and common-sense approach to address these concerns and are in the best interests of all shareholders.

Industry Context

This announcement reflects a common practice of companies refinancing their credit facilities to optimize their capital structure and secure favorable terms. The addition of a term loan facility provides Cracker Barrel with increased financial flexibility for strategic initiatives.

Comparison to Industry Standards

• Comparable companies in the restaurant industry, such as Darden Restaurants (DRI) and Texas Roadhouse (TXRH), typically maintain revolving credit facilities and term loans to manage their capital needs.
• The leverage and coverage ratios required by Cracker Barrel's new credit facility are generally in line with industry standards for companies with similar credit profiles.
• The inclusion of a proxy access provision in the company's bylaws is becoming increasingly common among publicly traded companies, reflecting a trend towards greater shareholder rights.

Corporate Governance

Stakeholder Impact

• Shareholders may benefit from the increased financial flexibility provided by the new credit facility.
• Employees may benefit from the company's continued financial stability and growth.
• Customers and suppliers are unlikely to be directly impacted by this announcement.

Next Steps

• The company intends to file a preliminary and definitive proxy statement in connection with the solicitation of proxies for the Annual Meeting.
• The Board intends to seek the non-binding, advisory ratification of each of the Ineligibility Provision, the Reimbursement Provision and the Proxy Access Provision from the shareholders of the Company entitled to vote at the 2025 annual meeting of shareholders.

Key Dates

Keywords

credit facility, revolving credit, term loan, debt, financial covenants, bylaws, proxy access, corporate governance, Cracker Barrel