8-K: Lazydays Holdings Amends Credit Agreement, Secures $15 Million Loan

Lazydays Holdings, Inc. has entered into a second amendment to its credit agreement and a new $15 million mortgage loan to improve its financial flexibility.

Summary

• Lazydays Holdings has amended its existing credit agreement, removing certain financial covenant requirements for March and April 2024.
• The amendment increases interest rates on the revolving credit and floor plan facilities until a leverage ratio of less than 3.00 to 1.00 is achieved.
• The lenders' aggregate commitment for the floor plan line of credit has been reduced from $525 million to $480 million.
• The company is required to repay $10 million of revolving credit loans by the end of 2024.
• Financial covenants are amended, including adjustments to the maximum Total Net Leverage Ratio, minimum Consolidated Fixed Charge Coverage Ratio, minimum Consolidated Current Ratio, minimum Consolidated EBITDA, and minimum Liquidity.
• The company is prohibited from entering into transactions with affiliates without prior written consent from the Administrative Agent.
• Lazydays also secured a $15 million mortgage loan, increasing the total mortgage loan to $50 million.
• The proceeds from the new mortgage loan will be used to make a $5 million payment under the amended credit agreement and for general corporate purposes.
• In connection with the mortgage loan, the company issued warrants to purchase up to 2 million shares of common stock at $5.25 per share to related parties of the lender.
• The conversion price of the company's Series A Convertible Preferred Stock was adjusted to $9.65 per share due to the issuance of warrants at a price less than the prior conversion price.

Sentiment

Score: 4

Explanation: The document reflects a mixed sentiment. While the company has secured additional funding and addressed some immediate financial concerns, the increased interest rates, reduced credit line, and required repayments indicate a challenging financial situation. The issuance of warrants also suggests a need for capital, which is not a positive sign.

Positives

• The amendment provides increased financial flexibility by removing certain financial covenant requirements for March and April 2024.
• The new $15 million mortgage loan provides additional capital for the company.
• The company has addressed the need for a capital infusion by securing the new mortgage loan.

Negatives

• The amendment increases interest rates on the revolving credit and floor plan facilities.
• The lenders' aggregate commitment for the floor plan line of credit has been reduced.
• The company is required to repay $10 million of revolving credit loans by the end of 2024.
• The company is prohibited from entering into transactions with affiliates without prior written consent from the Administrative Agent.

Risks

• Increased interest rates on the revolving credit and floor plan facilities could increase borrowing costs.
• The reduction in the floor plan line of credit could limit the company's ability to finance inventory.
• The requirement to repay $10 million of revolving credit loans by the end of 2024 could strain cash flow.
• The prohibition on transactions with affiliates without prior written consent could limit operational flexibility.
• The company's ability to meet the Total Net Leverage Ratio of less than 3.00 to 1.00 by June 30, 2025 is uncertain.

Future Outlook

The company intends to use the remaining proceeds from the new mortgage loan for general corporate purposes.

Management Comments

• The board of directors established a special committee of independent directors to evaluate and negotiate financing options.
• The special committee was advised by Richards, Layton & Finger, P.A. and Holland & Knight LLP, and also obtained certain external financial market advice.
• Upon reviewing available alternatives, the special committee unanimously approved the increase to the size of the mortgage loan facility and the related warrant issuance.

Industry Context

The amendment and new loan reflect the company's efforts to navigate current market conditions and improve its financial position. The adjustments to financial covenants and the securing of additional capital are common strategies for companies in the RV industry facing economic uncertainty.

Comparison to Industry Standards

• The increase in interest rates is a common response by lenders to increased risk, which is a trend in the current economic environment.
• The reduction in the floor plan line of credit is a measure to reduce exposure, which is a common practice in the RV industry during periods of economic uncertainty.
• The issuance of warrants is a common method for companies to raise capital, especially when facing financial challenges.
• The adjustment of financial covenants is a common practice in credit agreements to reflect changing economic conditions and company performance.

Related Party Transactions

• The company issued warrants to purchase up to 2 million shares of common stock to Coliseum Capital Partners, L.P. and Blackwell Partners LLC Series A, each an advisory client of Coliseum Capital Management, LLC, an affiliate of the Mortgage Lender.

Stakeholder Impact

• Shareholders may be concerned about the increased interest rates and the potential dilution from the issuance of warrants.
• Employees may be affected by any potential cost-cutting measures resulting from the company's financial situation.
• Customers may not be directly impacted by this announcement.
• Suppliers may be affected by any potential changes in the company's purchasing patterns.
• Creditors may be concerned about the company's ability to meet its financial obligations.

Next Steps

• The company is required to repay $10 million of revolving credit loans by the end of 2024.
• The company must deliver a Compliance Certificate for the Fiscal Quarter ending June 30, 2025, demonstrating a Total Net Leverage Ratio of less than 3.00 to 1.00.
• The company must make a $15 million capital infusion to LDRV Holdings Corp. on or before June 10, 2024.

Key Dates

Keywords

credit agreement, mortgage loan, financial covenants, interest rates, revolving credit, floor plan facility, warrants, capital infusion, leverage ratio, preferred stock