UPDATE 1: 5:11 p.m. ET 2/23/2023: An ad hoc group of lenders to City Brewing is working with Perella Weinberg Partners as financial advisor, according to sources.
City Brewing and Perella Weinberg Partners did not respond to requests for comment.
--Harvard Zhang, Patrick Fitzgerald
Original Story 4:13 p.m. UTC on Feb. 23, 2023City Brewing Lenders Tap Gibson Dunn as Counsel as Liquidity TightensAn ad hoc group of lenders to City Brewing is working with Gibson Dunn as legal advisor to address the company’s liquidity woes in light of labor shortages, weakening consumer demand for seltzer water, and higher capital spending and interest expenses, according to sources.
The company’s management told lenders at the end of last year that the volume guidance in the fourth quarter will be lower than what it had projected, citing slowing demand for seltzer water, the sources said.
The two
sale-leaseback agreements last year, while boosting liquidity, have lowered the asset value of the company, which has worried the lenders, the sources added.
The company, which is also dealing with high labor costs, does not have much room to pass on the rising inflation costs to consumers, Reorg
reported earlier. Gross margin in the third quarter was 10.2%, down from 17.6% a year earlier.
The company’s $122 million revolving credit facility is subject to springing maximum first lien leverage covenant of 7.15x that triggers when borrowings exceed 30% of aggregate revolving commitments, which constrain the company’s access to liquidity, according to sources.
The company’s $843.9 million L+350 bps term loan was indicated today at 47.98/52.93, up significantly from 41/37 a month ago, according to Solve Advisors.
City Brewing, Charlesbank and Gibson Dunn did not immediately respond to requests for comment.
--Patrick Fitzgerald, Gaurav Sharma