eps3477.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
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Date
of Report (Date of earliest event reported): June 30,
2009
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AMERICAN
BILTRITE INC.
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(Exact
Name of Registrant as Specified in
Charter)
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Delaware
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1-4773
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04-1701350
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(State
or other jurisdiction of Incorporation)
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(Commission
File No.)
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(IRS
Employer Identification No.)
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57
River Street, Wellesley Hills, Massachusetts 02481-2097
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(Address
of principal executive offices, including zip
code)
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(781)
237-6655
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(Registrant's
telephone number, including area
code)
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Not
Applicable
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(Former
name or former address, if changed since last
report)
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Check
the appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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o
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
1.01.
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Entry
into a Material Definitive
Agreement.
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The
credit and intercreditor agreements set forth in Item 2.03 of this Current
Report on Form 8-K are incorporated by reference herein to the extent responsive
to and required to be included in this Item 1.01.
Factoring
Agreements
American
Biltrite Inc. (the "Company") and its subsidiary American Biltrite Far East,
Inc. ("ABFE") entered into receivables financing and other related agreements on
June 30, 2009 with Faunus Group International, Inc. ("FGI"). ABFE and
FGI entered into a Receivables Finance Agreement (the "Receivables Finance
Agreement"), whereby FGI agreed to make payments to ABFE in exchange for ABFE's
agreement to sell or assign to FGI all of ABFE's rights in and to certain
accounts receivable generated by ABFE with account debtors whose principal place
of business or chief executive office is not in the United States and the
related insurance policies. Under the agreement, the balance of
ABFE's rolling account with FGI will be calculated as the gross invoice value of
the ABFE accounts receivable multiplied by 80%, with certain adjustments for
fees, advances, a discount equal to the greater of (i) 7% or (ii) 2.5% above the
U.S. prime rate, the value of such accounts receivable disapproved or
re-approved by FGI and collections on such accounts receivable.
The
Company and FGI entered into a Debt Purchase Agreement on June 30, 2009 (the
"Debt Purchase Agreement"), whereby FGI agreed to make payments to the Company
in exchange for the Company's agreement to sell and assign to FGI all of the
Company’s rights in and to certain accounts receivable generated by the sale of
inventory in the Company's Belgian division and the related insurance
policies. Under the agreement, the purchase price to be paid by FGI
to the Company for such accounts receivable will be the gross invoice value of
such accounts receivable, minus a discount equal to the greater of the value of
such accounts receivable multiplied by (i) 7% or (ii) 2.5% above the U.S. prime
rate. The balance of the Company’s rolling account with FGI will be calculated
as the purchase price multiplied by 80%, with certain adjustments for fees,
advances, the value of such accounts receivable disapproved or re-approved by
FGI and collections on such accounts receivable.
The
maximum aggregate amount of accounts receivable that FGI will purchase from ABFE
under the Receivables Finance Agreement and from the Company under the Debt
Purchase Agreement, respectively, is $2,000,000 (United States dollars). Under
both the Receivables Finance Agreement and the Debt Purchase Agreement, FGI will
charge ABFE and the Company, respectively, (i) an administration fee as a
percentage of the gross invoice value of the accounts receivables, (ii) a
closing or commencement fee, (iii) a minimum fee in the event that net funds
employed by ABFE or the Company each month pursuant to the applicable agreement
are less than $600,000 (United States dollars), (iv) a bank transfer fee and (v)
an over-payment fee when ABFE or the Company requires funds in excess of the
balance of its respective rolling account calculated in accordance with the
respective agreement.
The
obligations of ABFE and the Company under the Receivables Finance Agreement and
Debt Purchase Agreements are secured pursuant to related security agreements,
which place liens upon, and grant security interests in, certain assets of ABFE
and the Company, respectively. ABFE and the Company have also each guaranteed
the obligations of the other under the Receivables Finance Agreement and the
Debt Purchase Agreement, respectively, pursuant to separate guarantees, and to
that end, have granted FGI with security interests in specified
assets. FGI may require ABFE or the Company, respectively, to
repurchase any accounts receivable that remain unpaid 90 days or more from their
due date for payment that FGI disapproves of or for other
reasons. Both the Receivables Finance Agreement and the Debt Purchase
Agreement contain customary covenants for similar receivables financing
arrangements. The terms of both the Receivables Finance Agreement and
the Debt Purchase Agreement are 36 months, but the agreements will automatically
extend for 12-month terms unless terminated by ABFE, the Company or FGI, as
applicable, in accordance with the terms of the applicable
agreement. FGI may also terminate the relevant agreement if ABFE or
the Company, as applicable, (i) breaches the applicable agreement, (ii)
undergoes a change of control, (iii) fails to perform obligations under related
security agreements, (iv) becomes insolvent, (vi) suffers a material adverse
change or for other reasons, in each case, in accordance with the terms of the
applicable agreement.
The
foregoing descriptions of the Receivables Finance Agreement and the Debt
Purchase Agreement are qualified in their entirety by the Receivables Finance
Agreement and Debt Purchase Agreement, copies of which are incorporated by
reference herein and are attached hereto as Exhibits 10.3 and 10.4,
respectively.
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Termination
of a Material Definitive Agreement.
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On
June 30, 2009, the Company terminated its Amended and Restated Credit Agreement,
dated as of September 25, 2006, among the Company, K&M Associates L.P.,
American Biltrite (Canada) Ltd. and Bank of America, National Association, both
in its capacity as a domestic lender and as a domestic administrative agent,
Bank of America, National Association ("BofA"), acting through its Canada
branch, both in its capacity as a Canadian lender and as Canadian administrative
agent, and the other lenders from time to time party thereto (the "Bank of
America Agreement"). Copies of the Bank of America Agreement and
related agreements have been previously filed with and described in the
Company's periodic reports previously filed with the Securities and Exchange
Commission, which are accessible at the Securities and Exchange Commission's
website at www.sec.gov.
The
Bank of America Agreement provided American Biltrite Inc. and its subsidiary
K&M Associates L.P. ("K&M") with (i) a $30.0 million commitment under
the revolving credit facility (the "Revolver") with a $12.0 million borrowing
sublimit (the "Canadian Revolver") for American Biltrite Inc.’s subsidiary
American Biltrite (Canada) Ltd. and (ii) a $10.0 million term
loan. The Bank of America Agreement also provided for domestic and
Canadian letter of credit facilities with availability of up to $5.0 million and
$1.5 million, respectively, subject to availability under the Revolver and the
Canadian
Revolver,
respectively. The Revolver was due to expire on September 30,
2009. The term loan principal was payable in 20 quarterly
installments of $500,000 beginning December 31, 2006 with the last quarterly
principal payment scheduled to be due and payable on September 30,
2011. All amounts outstanding under the Bank of America Agreement
were repaid by the Company upon termination of the Bank of America Agreement
with proceeds from the Company's new credit facility that it entered into with
Wachovia Bank, National Association, as further described in Item 2.03 of this
Current Report on Form 8-K. The amounts repaid consisted of
$21,329,131.04 (United States dollars) for amounts owed with respect to the term
loan and domestic borrowings under the Revolver, $3,672,676.40 (Canadian
dollars) for amounts owed with respect to borrowings in Canadian dollars under
the Canadian Revolver, and $542,748.57 (United States dollars) for amounts owed
with respect to borrowings in United States dollars under the Canadian
Revolver.
As
disclosed in the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2009, on May 15, 2009, the Company entered into a limited waiver and
modification agreement (the "Waiver") to the Bank of America Agreement with
BofA, pursuant to which BofA granted the Company a temporary waiver through June
30, 2009 of the Company's default of the Bank of America Agreement due to the
Company’s failure to satisfy as of March 31, 2009 the fixed charge covenant
under the Bank of America Agreement. The temporary waiver granted by
BofA pursuant to the Waiver was scheduled to expire on June 30, 2009 and
contemplated the Company replacing the credit facility under the Bank of America
Agreement with a new credit facility with another lender by that
time. In connection with the Waiver, the Company, as previously
reported, paid BofA a fee of $5,000.
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Item
2.03.
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Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance
Sheet Arrangement of a Registrant.
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Wachovia Credit
Agreement
On
June 30, 2009, the Company entered into a Loan and Security Agreement by and
among the Company, Ideal Tape Co., Inc. and K&M Associates L.P., as "US
Borrowers"; American Biltrite (Canada) Ltd., as "Canadian Borrower"; Ocean State
Jewelry, Inc., Majestic Jewelry, Inc., 425 Dexter Associates, L.P. and ABFE as
"US Guarantors"; the parties to the agreement from time to time as lenders,
including Wachovia Bank, National Associates ("Wachovia") and its affiliates;
and Wachovia, as agent for the lenders (the "Credit Agreement"). The
Credit Agreement provides a credit facility to the Company and the other
applicable borrowers, which includes a term loan, a domestic revolving credit
facility, a Canadian revolving credit facility, and domestic and Canadian
letters of credit issuances.
The
maximum amount of outstanding revolving debt borrowings (which includes
borrowings under the revolving credit facilities and letters of credit
issuances) permitted at any time under the Credit Agreement is $30.0 million,
with a United States revolving loan maximum amount of $30.0 million, and a
Canadian revolving loan maximum amount of $12.0 million. The Credit Agreement
permits maximum letters of credit issuances of $6.0 million, of which Canadian
letters of credit issuances are limited to a maximum of $3.0
million. The maximum amount available for revolving debt borrowings
is reduced to the amount of the borrowing base if that amount is
lower. The borrowing base is based upon eligible assets of the
applicable borrowers, including accounts receivables and
inventory. The term of the Credit Agreement is three
years.
The
term loan under the Credit Agreement is for an aggregate original principal
amount of $8.0 million collectively for the Company and its subsidiary Ideal
Tape Co., Inc. (the "Term Loan"). The Term Loan principal is payable
in 72 monthly installments, with the first 71 principal installments in the
amount of $111,111 beginning on August 1, 2009 and with the final installment in
the amount of the entire unpaid balance of the Term Loan payable on July 1,
2015.
The
Company borrowed $23,021,282.55 (United States dollars) and $3,672,676.40
(Canadian dollars) under the revolving credit facilities on June 30, 2009, most
of which proceeds were used to repay amounts outstanding under the Company's
previous credit agreement with Bank of America, N.A., which agreement was
terminated on June 30, 2009, as further described in Item 1.02 of this Current
Report on Form 8-K. The Company and Ideal Tape Co., Inc. borrowed the
entire $8.0 million of the Term Loan at closing.
Interest
is payable monthly on borrowings under the Credit Agreement at rates based on a
base interest rate plus an applicable margin for each type of loan, which varies
depending on whether the loan is based on U.S., Canadian, or Eurodollar rate
loans and which ranges from an applicable rate of two hundred basis points over
U.S. and Canadian base rates to four hundred basis points over Eurodollar base
rates for revolving debt loans and three hundred basis points over U.S. base
rates and five hundred basis points over Eurodollar base rates for the Term
Loan. The Credit Agreement charges the Company and the other
borrowers a monthly unused borrowing line fee, at a rate equal to five-eighths
of one percent (0.625%) per annum. In addition, the Credit Agreement
imposes a monthly letter of credit fee equal to four percent (4%) per annum for
unused letter of credit availability.
All
obligations under the Credit Agreement of the US Borrowers are guaranteed by the
US Guarantors and secured by the assets of the US Borrowers and the US
Guarantors and all obligations of the Canadian Borrower under the Credit
Agreement are guaranteed by the US Guarantors and secured by the assets of the
US Guarantors and the Canadian Borrower.
Pursuant
to the Credit Agreement, payments on the Company's accounts receivable will be
deposited in accounts assigned by the Company and the other borrowers to
Wachovia and the funds in that account may used by Wachovia to pay down
outstanding borrowings under the Credit Agreement.
The
Credit Agreement contains customary bank covenants, including, but not limited
to, limitations on incurrence of debt and liens or other encumbrances on assets
or properties, sale of assets, making of loans or investments, including paying
dividends and redemptions of capital stock, the formation or acquisition of
subsidiaries and transactions with affiliates. The Credit Agreement
requires the Company and the other borrowers and the guarantors to maintain, on
a consolidated basis, a
minimum fixed charge coverage ratio that increases from 0.8:1.0 to 1.0:1.0 over
the term of the Credit Agreement. The Credit Agreement also requires
that the Company and the other borrowers and the guarantors to maintain, on a
consolidated basis, a minimum amount of earnings before interest, taxes,
depreciation, and amortization, as determined under, and for the periods
specified in, the Credit Agreement.
The
Credit Agreement also provides for events of default, including: payment
defaults; breaches of representations and warranties; covenant defaults; any
revocation or termination by the guarantors of their guarantees of the Company's
and the other borrowers' obligations under the Credit Agreement or the breach of
the guarantors' obligations under the guarantees; certain unsatisfied or
unvacated judgments against the Company or any other borrower or guarantors; the
dissolution of, or suspension or discontinuance of doing business by the
Company, any other borrower or any other guarantors; certain events of
bankruptcy and insolvency; defaults under related financing agreements;
specified factoring documents or certain other agreements; defaults based on
certain indictments or threatened indictments or judgments; failure of a
material provision of a loan document to be in full force and effect; changes of
control; certain ERISA defaults; and the occurrence of a material adverse
effect. If an event of default occurs and is continuing, amounts due
under the Credit Agreement may be accelerated and the commitments to extend
credit thereunder terminated, and the rights and remedies of the lenders under
the Credit Agreement, other financing agreements and applicable law may be
exercised, including rights with respect to the collateral securing the amounts
owed under the Credit Agreement.
In
connection with entering into the Credit Agreement, the Company also entered
into an Intercreditor and Lien Subordination Agreement dated June 30, 2009,
among Wachovia, as agent under Credit Agreement ("Agent"), FGI, the Company and
ABFE (the "Intercreditor Agreement"). Under the Intercreditor
Agreement, FGI and the Agent agree that liens held by creditors under the Credit
Agreement on all assets of the borrowers thereunder, other than certain accounts
and personal property in which FGI holds priority, shall be senior to any liens
on such collateral held by FGI, and liens held by FGI in certain accounts and
personal property shall be senior to any liens on such collateral held by
creditors under the Credit Agreement. The Intercreditor Agreement
provides, among other things, for enforcement procedures and remedies and the
application of proceeds in respect of such collateral.
The
foregoing descriptions of the Credit Agreement and the Intercreditor Agreement
are qualified in their entirety by the Credit Agreement and the Intercreditor
Agreement, copies of which are incorporated by reference herein and are attached
hereto as Exhibits 10.1 and 10.2, respectively.
Wachovia
serves as agent and Wachovia and its affiliates are lenders under a credit
agreement to which the Company's majority-owned subsidiary, Congoleum
Corporation, is a party as a borrower. That credit agreement provides
Congoleum Corporation with its principal source of borrowings.
On
July 7, 2009, the Company issued a press release announcing the foregoing
transactions. Such press release is attached hereto as Exhibit
99.1.
Item
9.01. Financial Statements and
Exhibits.
(d)
Exhibits.
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Exhibit
No.
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Description
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10.1
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Loan
and Security Agreement dated June 30, 2009, by and among American Biltrite
Inc., Ideal Tape Co., Inc., K&M Associates L.P., American Biltrite
(Canada) LTD., Ocean State Jewelry, Inc., Majestic Jewelry, Inc., 425
Dexter Associates, L.P., American Biltrite Far East, Inc. and Wachovia
Bank, National Association, a national banking association, in its
capacity as issuing bank, and Wachovia Bank, National Association, a
national banking association, in its capacity as agent and the other
lenders from time to time party thereto
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10.2
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Intercreditor
and Lien Subordination Agreement dated June 30, 2009, among Wachovia Bank,
National Association, as agent under Credit Agreement, Faunus Group
International, Inc., American Biltrite Inc. and American Biltrite Far
East, Inc.
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10.3
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Receivables
Finance Agreement dated June 30, 2009, by and between American Biltrite
Far East, Inc. and Faunus Group International, Inc.
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10.4
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Debt
Purchase Agreement dated June 30, 2009, by and between American Biltrite
Inc. and Faunus Group International, Inc.
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99.1
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American
Biltrite Inc. press release issued July 7,
2009
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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 hereunto
duly authorized.
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Date: July
7, 2009
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AMERICAN
BILTRITE INC.
By:
_/s/ Howard N.
Feist III
Name: Howard
N. Feist III
Title: Chief
Financial Officer
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EXHIBIT
INDEX
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Exhibit
No.
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Description
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10.1
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Loan
and Security Agreement dated June 30, 2009, by and among American Biltrite
Inc., Ideal Tape Co., Inc., K&M Associates L.P., American Biltrite
(Canada) LTD., Ocean State Jewelry, Inc., Majestic Jewelry, Inc., 425
Dexter Associates, L.P., American Biltrite Far East, Inc. and Wachovia
Bank, National Association, a national banking association, in its
capacity as issuing bank, and Wachovia Bank, National Association, a
national banking association, in its capacity as agent and the other
lenders from time to time party thereto
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10.2
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Intercreditor
and Lien Subordination Agreement dated June 30, 2009, among Wachovia Bank,
National Association, as agent under Credit Agreement, Faunus Group
International, Inc., American Biltrite Inc. and American Biltrite Far
East, Inc.
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10.3
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Receivables
Finance Agreement dated June 30, 2009, by and between American Biltrite
Far East, Inc. and Faunus Group International, Inc.
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10.4
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Debt
Purchase Agreement dated June 30, 2009, by and between American Biltrite
Inc. and Faunus Group International, Inc.
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99.1
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American
Biltrite Inc. press release issued July 7,
2009
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