Wed 12/16/2020 09:16 AM
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Relevant Items:
Dave & Busters Covenants Tear Sheet and Debt Document Summaries
Dave & Busters Debt Documents

Continue reading for our Americas Covenants team's analysis of the Dave & Buster's covenants tear sheet and Request a Trial for access to the linked documents, tear sheets, and summaries as well as our coverage of thousands of other stressed/distressed debt situations.
Current Situation

On its second-quarter earnings call, Dave & Buster’s disclosed that as of Sept. 9, 84 of its 138 stores have been reopened. The company further disclosed that “61 of our 84 reopened stores generated positive store level EBITDA for the month of August.”

The company stated on the third-quarter earnings call that although it was encouraged by recent performance, management noted that “Covid resurgence around the country has resulted in new operating limitations, store re-closures, and further delays in the company's ability to reopen stores. This has naturally had a negative impact on our performance during the first five weeks of the fourth quarter.”

As a result of these continued delays and general headwinds related to Covid-19, LTM EBITDA as of Nov. 1 was $12.5 million and the company’s total leverage was 45.3x, as compared with $311 million and 2x for the same period in 2019.

During the third quarter the company issued $550 million of senior secured notes, the proceeds of which were used to fully repay outstanding debt under its term loan facility and a substantial portion of debt under its revolving credit facility. In connection with the issuance of the notes, the company also amended its credit agreement to extend the covenant relief period provided by an April amendment.

The company’s capital structure as of Nov. 1 is as follows:
Dave & Buster's Capital structure

Additional Amendments to Credit Facility

On Oct. 27, the company entered into a covenant relief amendment with its lenders to extend the covenant suspension enacted by an April 14 amendment. Pursuant to the amendment, both the 3.5x total leverage ratio covenant and a 1.25x FCCR covenant were suspended through the quarter ending Jan. 31, 2022. When the leverage ratio covenant is reinstated, the company will need to comply with a 4.75x total leverage ratio for the quarter ending April 2022; that ratio requirement will step down to 4x, 3.75x and 3.5x for the quarters ending July 2023, January 2023 and April 2023, respectively.

Among other changes, the amendment also increased a minimum liquidity requirement from $30 million to $150 million, added an anti-cash-hoarding provision during the “Basket Suspension Period” that requires the company to repay outstanding revolving borrowings whenever unrestricted cash exceeds $100 million, and extended maturity by two years.

Until the April 2023 quarter, pursuant to the “Basket Suspension Period,” the company is also restricted from accessing most debt, restricted payments, investments and prepayments baskets under the credit agreement.

As of Nov. 1, the company is restricted from incurring any debt, paying any dividends and making any investments under the credit agreement.

A comprehensive report on the Credit Agreement, as amended, can be found HERE.
Senior Secured Notes

On Oct. 27, the company issued $550 million of 7.625% of senior secured notes, which provide the company with much more flexibility than is permitted under the credit agreement. Nevertheless, the company’s flexibility will be governed by the more restrictive negative covenant package under the credit agreement.

A comprehensive report on the Senior Secured Notes can be found HERE.

--Maribeth Lemen
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