Click to Listen to Article
Utz’s Debt Documents
Utz’s Covenants Tear Sheet, Debt Document Summary
Utz Brands Inc., through its wholly owned subsidiary Utz Quality Foods LLC, is a producer, marketer and distributor of snack food products in the United States. The company operates 14 manufacturing facilities that produce a broad offering of salty snacks, which are distributed nationally to retailers through direct shipments, distributors and more than 1,600 direct-store delivery routes. Continue reading for our Americas Covenants team's analysis of the Utz debt documents and Request a Trial for access to the linked debt documents, tear sheets, and summaries as well as our coverage of thousands of other stressed/distressed debt situations.
Utz went public on Aug. 28, 2020
, by way of merger with Collier Creek Holdings, a special purpose acquisition company with a stated focus on the consumer goods sector. On Dec. 14
, the company acquired Truco Enterprises - a seller of tortilla chips and other snack food products under the On The Border brand - for a total purchase price of $480 million. The Truco acquisition was financed with a $490 million first lien bridge loan, which the company repaid on Jan. 20, 2021
, using the proceeds of a new $310 million first lien incremental term loan and approximately $181 million of warrant redemption proceeds.
As of Jan. 20, Utz had a $160 million ABL facility and a $720 million term loan facility, which are each guaranteed by the company’s wholly owned material domestic subsidiaries, and secured by crossing liens on term loan priority and ABL priority collateral described in an undisclosed intercreditor agreement, excluding real property and certain other specified assets.
A timeline of the company’s SPAC merger with Collier Creek and subsequent financings and acquisitions is shown below:
The company’s capital structure and organizational chart as of Sept. 27, 2020, pro forma for the Dec. 14, 2020, Truco acquisition and the Jan. 20, 2021, term loan refinancing, are shown below:
- Liquidity and financial covenants - The ABL contains a springing 1.00x FCCR covenant that is triggered when excess availability is less than the greater of $7 million and 10% of the line cap (defined as the lesser of the borrowing base and the aggregate ABL commitments). Because the ABL was undrawn as of Sept. 27, 2020, the FCCR covenant did not apply as of that time.As of Sept. 27, pro forma for the January 2021 ABL upsize, the company had approximately $178 million of accessible liquidity, comprising $32 million of unrestricted cash and $146 million of ABL availability.
- Debt and liens - As of Sept. 27 (pro forma), the company’s debt documents provided $15 million of incremental ABL capacity, $332 million of pari capacity for incremental or equivalent debt under the term loans, and $72 million of general liens. The company’s debt documents also permit up to $163 million of structurally senior debt, and the term loans permit the company to incur up to $202 million of ratio debt, or incremental or equivalent debt that matures inside of the first lien term loans.
- Dividends and investments - As of Sept. 27 (pro forma) - in addition to at least $50 million of shared capacity plus additional amounts available under a builder basket based on 50% ECF commencing Jan. 1, 2018 - the company’s term loans provided for at least $206 million of general restricted payment capacity and at least $220 million of general investment capacity, of which at least $160 million may be invested in unrestricted subsidiaries, plus additional leverage-based investments up to 4.00x total net leverage.Because the ABL was undrawn as of Sept. 27, it did not restrict the company from paying dividends or making investments as of that time.
- Prepayments, repurchases - The term loan agreement restricts the company from prepaying payment subordinated debt in excess of $50 million and provides the company with $40 million of general capacity for prepayments in excess of that threshold amount.Because the ABL was undrawn as of Sept. 27, it did not restrict the company from prepaying other debt as of that time, including prepayments of the first lien term loans.
- Asset sales - In addition to typical asset sale carve-outs, the company’s debt documents permit Utz to make “Permitted Distribution Business Dispositions,” which include the transfer of any trucks, contracts and other assets related to the company’s direct-store delivery network, as long as the aggregate book value of the transferred assets does not exceed 15% of the book value of the consolidated assets of the restricted parties as of Jan. 20, 2021.