Item 1.01 - Entry into a Material Definitive Agreement.
On December [17], 2018, Turtle Beach Corporation, a Nevada corporation (the Company, we or us), amended its existing Loan,
Guaranty and Security Agreement (as amended, the ABL Agreement), by and among the Company, Voyetra Turtle Beach, Inc. (VTB and together with the Company, the US Borrowers), Turtle Beach Europe Limited
(TBE or the UK Borrower), VTB Holdings, Inc., as guarantor (VTBH, and collectively with VTB and TBE, the Obligors), the financial institutions party thereto as lenders and Bank of America, N.A., as
administrative agent, collateral agent and security trustee for the lenders thereunder (BOA). The Company intends to use a portion of the proceeds of the ABL Facility to pay off all amounts outstanding under its Term Loan, Guaranty and
Security Agreement, (as amended, the Term Loan Agreement), by and among the Company, the Obligors, Crystal Financial SPV LLC, Crystal Financial LLC, the other lenders party thereto from time to time and Crystal Financial LLC, as
administrative agent, collateral agent and security trustee for the lenders thereunder (in such capacity, the Term Loan Agent and, collectively, Crystal) and its subordinated promissory notes (as amended, the
Notes and each a Note) with SG VTB Holdings, LLC, the Companys largest stockholder (SG VTB), and Doornink Revocable Living Trust, a trust affiliated with the chairman of the Companys board of
directors. Capitalized terms used but not otherwise defined in this Current Report on Form
8-K
have the meanings given to such terms in the ABL Agreement.
ABL Agreement
The ABL Agreement is an $80,000,000
revolving credit facility with designated
sub-facility
limits of $68,000,000 for the US Borrowers and $12,000,000 for the UK Borrower. The ABL Agreement also provides for a $40 million accordion feature
and the ability to increase the US Borrowing Base with a FILO Loan of up to $6,800,000 under the US
sub-facility.
Actual credit availability under the ABL Agreement is subject to a borrowing base limitation
that is calculated based on a percentage of eligible trade accounts receivable and inventories, the balances of which fluctuate, and is subject to discretionary reserves and revaluation adjustments. The borrowers may utilize the ABL Agreement for
borrowings as well as for the issuance of bank guarantees, letters of credit and other general corporate purposes as defined by the ABL Agreement.
Termination
. The ABL Agreement terminates on the earliest of (a) March 5, 2024 and (b) the date that is 91 days prior to the maturity
date of the TBC Notes or any other Subordinated Indebtedness.
Guarantees
. The obligations of the US Borrowers are guaranteed by VTBH, and the
obligations of the UK Borrower are guaranteed by the US Borrowers and VTBH.
Security
. The ABL Agreement is secured by a first priority all assets
lien of the Obligors.
Interest Rates and Fees
. Borrowings will bear interest at a rate that varies depending on the type of loan and the Borrower.
The interest rate will be calculated using a base rate plus a margin. Depending on the type of loan, the base rate will either be a rate published by Bank of America or LIBOR. The margin will range from 0.50% to 1.25% for base rate loans, 1.25% to
2.00% for LIBOR loans and from 2.00% to 2.75% for US FILO Loans. The ABL Agreement also provides for an unused line fee, letter of credit fees, and agent fees.
Voluntary Prepayment
. The Borrowers will be able to voluntarily prepay the principal of any advance, without penalty or premium, at any time in whole
or in part, subject to certain breakage costs.
Financial and Other Covenants
. If certain availability thresholds are not met or certain other
events which would cause a Financial Covenant Trigger Period occur, the ABL Agreement requires the Company and its restricted subsidiaries to maintain a fixed charge coverage ratio, defined as the ratio, determined on a consolidated basis for the
Company and its subsidiaries for the applicable measurement period, of (a) EBITDA minus Capital Expenditures (except those financed with Borrowed Money other than Revolver Loans) and cash taxes paid for such period to (b) Fixed Charges for
such period. The ABL Agreement also contains affirmative and negative covenants that, subject to certain exceptions more fully described in the ABL Agreement, limit our ability to take certain actions, including our ability to incur debt, pay
dividends and repurchase stock, make certain investments and other payments, enter into certain mergers and consolidations, engage in sale leaseback transactions and transactions with affiliates, and encumber and dispose of assets.