Warby Parker (NYSE: WRBY), the eyewear company, has entered into a Credit Agreement with JPMorgan Chase (NYSE:JPM) Bank, Citibank, and other lenders, providing a revolving credit facility of up to $120 million, with an option to increase the borrowing capacity by an additional $55 million under certain conditions. This agreement, which was finalized on Tuesday, February 21, 2024, will mature on the same date in 2029.
The credit facility is intended to support Warby Parker's working capital and other general corporate purposes. It offers the flexibility to borrow, repay, and re-borrow funds up until the maturity date. At the time of the agreement's closing, Warby Parker had not utilized any portion of the credit facility.
Interest rates on the borrowings are variable, with the option of being based either on the prime rate plus a margin ranging from 0.65% to 0.90% or on an adjusted SOFR (Secured Overnight Financing Rate) plus a margin of 1.65% to 1.90%. The applicable margin will be determined by the company's consolidated senior net leverage ratio.
Warby Parker is also responsible for customary fees associated with credit facilities of this size and type, including an unused commitment fee of 0.20% to 0.25%, again dependent on the leverage ratio, and fees for letters of credit. The company also paid upfront fees to the lenders as part of the agreement.
The credit agreement stipulates that the company's borrowings are secured by first-lien security interests in substantially all of the company's assets. Moreover, the obligations under the credit agreement will be guaranteed by certain domestic subsidiaries of the company in the future.
A financial maintenance covenant is included, which requires Warby Parker to maintain a maximum consolidated senior net leverage ratio of 3.00:1.00, but this will only apply if borrowings exceed $30 million. This ratio will be assessed on the last day of each fiscal quarter.
The agreement also includes standard affirmative and negative covenants that limit the company's indebtedness, liens, capital expenditures, asset sales, investments, and restricted payments, with certain exceptions and allowances. Additionally, there are customary representations, warranties, and events of default provisions for a transaction of this type.
This financial move by Warby Parker, as detailed in the recent SEC filing, is part of the company's strategy to maintain liquidity and financial flexibility in its operations. The information is based on a press release statement.
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