Vintage Wine amends credit agreement to waive defaults, edit covenants

By Wendy Van Sickle

Columbus, Ohio, Oct. 13 – Vintage Wine Estates, Inc. entered into a fourth amendment to its second amended and restated loan and security agreement dated Dec. 19, 2022 with BMO Bank NA as administrative agent on Oct. 12 to make several changes, according to an 8-K filed with the Securities and Exchange Commission.

The amendment does the following:

• Waives some existing events of default relating to the company’s failure to comply with the financial covenants and financial reporting requirements set forth in the credit agreement for prior fiscal periods;

• Reduces the total revolving commitment and the total delayed-draw term loan commitment to $200 million and $38.1 million, respectively;

• Replaces the maximum debt to capitalization financial covenant with a minimum adjusted EBITDA financial covenant of not less than $4 million for the fiscal quarter ending Sept. 30; $17 million for the two fiscal quarter period ending Dec. 31; $27 million for the three fiscal quarter period ending March 31, 2024; $34 million for the four fiscal quarter period ending June 30, 2024; and $35 million for each four fiscal quarter period ending thereafter;

• Adds a minimum liquidity covenant of $25 million – or $15 million for fiscal quarters ending in December – which applies only for the fiscal quarters ending Sept. 30, 2023 through and including Dec. 31, 2024, the “covenant modification period”;

• Suspends the minimum fixed-charge coverage ratio covenant for the fiscal quarters ending Sept. 30 through and including June 30, 2024 and provides for a step-down of the minimum fixed-charge coverage ratio to 1.00 to 1.00 for the remainder of the covenant modification period;

• Adds an equity cure right for the company in the event of future breaches of the financial covenants;

• Reduces revolver availability by $15 million during the months of February through September of each year and $10 million during the months of October through January of each year;

• Suspends the exercise of incremental facilities during the covenant modification period;

• Restricts all permitted acquisitions during the term of the credit facilities, unless previously approved by the required lenders;

• Increases the applicable margin for all credit facilities to 300 basis points for SOFR loans, which will step up further if certain prepayments of the term loans are not made by certain dates;

• Adds additional mandatory prepayments of $10 million by no later than March 31, 2024, an additional $10 million by no later than June 30, 2024 and an additional $25 million by no later than Dec. 31, 2024;

• Adds additional mandatory prepayments in the event that the borrowers maintain a cash balance in excess of $20 million;

• Permits additional sales of certain real property with a total appraised value of about $60 million, in addition to related personal property assets; and

• Adds certain additional reporting requirements.

The company reported that at its fiscal year end, it had about $54 million in liquidity comprising $18.2 million in cash and approximately $35.9 million available under its revolver.

During fiscal 2023, Vintage Wine said it reduced total debt by $24.9 million to $303.3 million at June 30, primarily using the proceeds from the sale of assets.

“We believe the amended credit agreement together with our focused cash management and operational improvements to generate cash in fiscal 2024 provide the necessary liquidity to execute on our plans. In addition, we intend to market certain assets at fair value,” Kristina L. Johnston, chief financial officer of Vintage Wine, said in a news release. “We believe these efforts during our transition year will support our ability to make the required principal payments in fiscal 2024 to avoid higher interest rates and achieve our goal to reduce debt.”

The family of wineries and wines is based in Incline Village, Nev.

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