Item 5. Other Information
Item 5. Other Information
Disclosure Pursuant to Item 1.01 of Current Report on Form 8-K - Entry into a Material Definitive Agreement .
On November 7, 2023, TPB Specialty Finance, LLC, a wholly-owned subsidiary of the Company (the “ABL Borrower”), entered into a new $75.0
million asset-backed revolving credit facility (the “2023 ABL Facility”), with the several lenders thereunder, and Barclays Bank Plc, as administrative agent (the “Administrative Agent”) and as collateral agent (the “Collateral Agent”) and
First-Citizens Bank & Trust Company as additional collateral agent (the “Additional Collateral Agent”). Under the 2023 ABL Facility, the ABL Borrower may draw up to $75.0 million under Revolving Credit Loans and LILO Loans. The 2023 ABL
Facility includes a $40.0 million accordion feature. In connection with the 2023 ABL Facility, Turning Point Brands contributed certain existing inventory to the ABL Borrower. The 2023 ABL Facility is secured on a first priority basis (subject to
customary exceptions) by all assets of the ABL Borrower.
The 2023 ABL Facility contains customary borrowing
conditions including a borrowing base equal to the sum of (a) the lesser of (1) 85% of the lower of (A) the market value (on a first in first out basis) of the sum of eligible inventory, plus eligible in-transit inventory of the ABL
Borrower and (B) 85% of the cost of the sum of eligible inventory, plus eligible in-transit inventory of the ABL Borrower and (2) 85% of the net orderly liquidation value (“NOLV”) percentage of the lower of (1)(A) or (1)(B); plus (b) 85% of the
face value of all eligible accounts of the ABL Borrower minus (c) the amount of all eligible reserves. The 2023 ABL Facility also includes a “last in last out” (“LILO”) borrowing base equal to the sum of (a) the lesser of: (1) 10% of the lower of
(A) the market value (on a first in first out basis) of the sum of eligible inventory, plus eligible in-transit inventory of the ABL Borrower and (B) the cost of the sum of eligible inventory, plus eligible in-transit inventory and (2) 10% of the
NOLV percentage of the lower of (1)(A) or (1)(B); plus (b) 10% of the face amount of eligible account; minus (c) the amount of all eligible reserves.
Amounts borrowed under the 2023 ABL Facility are subject to
an interest rate margin per annum equal to (a) from and after the closing date until the last day of the first full fiscal quarter ended
after the closing date, (i) 1.25% per annum, in the case base rate loans, and (ii) 2.25% per annum, in the case of revolving credit loans that are SOFR Loans, (b)(i) 2.25% per annum, in the case of LILO loans that are base rate loans, and (ii)
3.25% per annum, in the case of LILO loans that are SOFR loans, (c) on the first day of each fiscal quarter, the applicable interest rate margins will be determined from the pricing grid below based upon the historical excess availability for the
most recent fiscal quarter ended immediately prior to the relevant date, as calculated by the Administrative Agent.
Level
Historical Excess Availability
Applicable Margin
for SOFR Loans
Applicable Margin
for Base Rate Loans
I
Greater than or equal to 66.66%
1.75%
0.75%
II
Less than 66.66%, but greater than or equal to 33.33%
2.00%
1.00%
III
Less than 33.33%
2.25%
1.25%
The 2023 ABL Facility also requires the Company and its
restricted subsidiaries to maintain a fixed charge coverage ratio of at least 1.00 to 1.00 as of the end of any four consecutive fiscal quarters on or after the closing date if excess availability shall be less than the greater of (a) 12.5% of the line cap and (b) $9.375 million, at any time and continuing until excess availability is equal to or exceeds the greater of (i)
12.5% of the line and (ii) $9.375 million for thirty (30) consecutive calendar days; provided that such $9.375 million level shall automatically increase in proportion to the amount of any increase in the aggregate revolving credit commitments
thereunder in connection with any incremental facility.
The 2023 ABL Facility shall mature on the earlier of (x) November 7, 2027 and (y) the date that is 91 days prior to the maturity date
of any material debt of the ABL Borrower or the Company or any of its restricted subsidiaries (subject to customary extensions agreed by the lenders thereunder); provided that clause (y) shall not apply to the extent that on any applicable date
of determination (on any date prior to the date set forth in clause (y)), (A) the sum of (x) cash that is held in escrow for the repayment of such material debt pursuant to arrangements satisfactory to the Administrative Agent, (y) cash that is
held in accounts with the Administrative Agent and/or the Additional Collateral Agent, plus (z) excess availability, is sufficient to repay such material debt and (B) the ABL Borrower has excess availability of at least $15.0 million after giving
effect to such repayment of material debt, including any borrowings under the commitments in connection therewith.
Disclosure Pursuant to Item 1.02 of Current Report on Form 8-K – Termination of a Material Definitive Agreement .
On November 7, 2023, the Company terminated the 2021 Amended Revolving Credit Agreement in connection with the entry by one of its
subsidiaries into the new 2023 ABL Facility.
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Item 6. Exhibits
Exhibit No.
Description
10.1
Amendment No 1. Dated as of May 10, 2023, to the Credit Agreement, dated as of February 11, 2021, by and among Turning Point Brands, Inc., the obligors party thereto, Barclays Bank PLC, as
administrative agent, and the lenders party thereto (incorporated herein by reference to Exhibit 10.1 of Turning Point Brand, Inc’s Current Report on Form 8-K filed with the Commission on May 16, 2023 (File No. 001-37763).
31.1
Rule 13a-14(a)/15d-14(a) Certification of Graham Purdy.*
31.2
Rule 13a-14(a)/15d-14(a) Certification of Luis Reformina.*
31.3
Rule 13a-14(a)/15d-14(a) Certification of Brian Wigginton.*
32.1
Section 1350 Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101
XBRL (eXtensible Business Reporting Language). The following materials from Turning Point Brands, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, filed on
November 8, 2023, formatted in Inline XBRL (iXBRL): (i) consolidated balance sheets, (ii) consolidated statements of income, (iii) consolidated statements of comprehensive income, (iv) consolidated statements of cash flows, and (v) the
notes to consolidated financial statements.*
104
Cover Page Interactive Data File (formatted in iXBRL and included in Exhibit 101).*
*
Filed or furnished herewith
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
TURNING POINT BRANDS, INC.
By: /s/ Graham Purdy
Name: Graham Purdy
Title: President and Chief Executive Officer
By: /s/ Luis Reformina
Name: Luis Reformina
Title: Chief Financial Officer
By: /s/ Brian Wigginton
Name: Brian Wigginton
Title: Chief Accounting Officer
Date: November 8, 2023
53
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.