Aaron’s signs $175 million term loan, $375 million revolver

By Wendy Van Sickle

Columbus, Ohio, April 1 – Aaron’s Co., Inc. entered into a new unsecured credit facility on Friday that provides for a $175 million term loan and a $375 million revolver, according to an 8-K filing with the Securities and Exchange Commission.

The new financing replaces the company’s existing $250 million credit facility dated Nov. 9, 2020.

There is a $35 million sublimit for swingline loans and a $35 million sublimit for letters of credit.

The company refinanced all obligations under the existing credit facility and incurred the $175 million term loan and $117 million of debt under the revolver to finance the $230 million cash purchase price for the acquisition of BrandsMart U.S.A.

Aaron’s may request up to $300 million of incremental facilities or 1.0x the company’s consolidated EBITDA for the most recently ended four fiscal quarters.

Borrowings will bear interest at SOFR plus a margin ranging from 150 basis points to 225 bps, based on the company’s total net debt to EBITDA ratio.

Both tranches mature on April 1, 2027. The term loan amortizes in quarterly installments, commencing on Dec. 31, 2022 in an amount equal to 2.5% of the original principal amount during the first and second years after closing and 5% during the third, fourth and fifth years, with the remainder due at closing.

The obligations are unsecured but are subject to a springing security in the event that the total net debt to EBITDA ratio exceeds 1.50 to 1.00 as of the end of any period of four consecutive fiscal quarters.

The credit facility contains a maximum total net debt to EBITDA ratio of 2.75 to 1.00 and a minimum fixed charge coverage ratio of 1.75 to 1.00.

Truist Bank is administrative agent. Truist Securities, Inc., JPMorgan Chase Bank, NA, BofA Securities, Inc. and Citizens Bank, NA are the joint lead arrangers and bookrunners. JPMorgan, Bank of America, NA and Citizens Bank, NA are co-syndication agents.

Fifth Third Bank, NA and Regions Bank are co-documentation agents.

The company also entered a new $12.5 million franchise loan with Truist as servicer, which replaces its existing $25 million franchise loan dated Nov. 17, 2020.

Borrowings under this loan bear interest at SOFR plus a margin ranging from 150 bps to 225 bps.

The acquisition transaction is expected to close in the second quarter of 2022.

BofA Securities, Inc. is acting as financial adviser to Aaron's and Jones Day is acting as legal adviser. Cassel Salpeter & Co., LLC is acting as financial adviser to BrandsMart and Cooley LLP is acting as legal adviser.

Aaron’s is an Atlanta-based lease-to-own furniture retailer. BrandsMart is an appliance and consumer electronics retailer in the southeast United States.

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