| Item 1.01. | Entry into a Material Definitive Agreement. |
On September 20, 2024 (the “Closing Date”), OneSpaWorld Holdings Limited (“OneSpaWorld”) and its subsidiaries, Dory Acquisition Sub, Inc. (“Dory Acquisition”) and OneSpaWorld (Bahamas) Limited (“OneSpaWorld Bahamas” and together with Dory Acquisition, the “Borrowers”), entered into a credit agreement (the “New Credit Agreement”) with Bank of America, N.A., as administrative agent, and certain lenders party thereto, providing for senior secured credit facilities consisting of (x) a term loan facility of $100 million (of which $70 million was borrowed by Dory Acquisition and $30 million was borrowed by OneSpaWorld Bahamas) (the “Term Loan Facility”), which was fully drawn on the Closing Date, and (y) a revolving loan facility of up to $50 million (the “Revolving Facility” and, together with the Term Loan Facility, the “Credit Facilities”), which Revolving Facility remained undrawn upon the closing of the Credit Facilities. The Revolving Facility includes borrowing capacity available for letters of credit up to $5 million. Any issuance of letters of credit reduces the amount available under the Revolving Facility. The Credit Facilities mature on September 20, 2029.
Loans outstanding under the Credit Facilities will accrue interest at a rate per annum equal to Term SOFR plus a margin of 1.90%, with three step ups to a maximum margin of 2.65% depending on the most recent consolidated leverage ratio of OneSpaWorld and its restricted subsidiaries, and undrawn amounts under the Revolving Facility will accrue a commitment fee at a rate per annum of 0.25% on the average daily undrawn portion of the commitments thereunder, with three step ups to a maximum commitment fee of 0.40% depending on the most recent consolidated leverage ratio of OneSpaWorld and its restricted subsidiaries.
The obligations under the Credit Facilities are guaranteed by OneSpaWorld and each of its direct or indirect wholly-owned subsidiaries other than certain excluded subsidiaries (the “Subsidiary Guarantors”). The obligations of OneSpaWorld, the Borrowers and the Subsidiary Guarantors under the Credit Facilities are secured by substantially all of their assets.
The Term Loan Facility requires the Borrowers to make certain mandatory prepayments, with (i) 100% of net cash proceeds of all non-ordinary course asset sales or other dispositions of property, subject to the ability to reinvest such proceeds and certain other exceptions, and (ii) 100% of the net cash proceeds of any debt incurrence, other than debt permitted under the definitive agreements (but excluding debt incurred to refinance the Credit Facilities). The Borrowers also are required to make quarterly amortization payments equal to 1.25% of the original principal amount of the Term Loan Facility commencing after the second full fiscal quarter after the Closing Date of the Credit Facilities (subject to reductions by optional and mandatory prepayments of the loans). The Borrowers may prepay the Credit Facilities at any time without premium or penalty, subject to payment of customary breakage costs.
The New Credit Agreement contains a financial covenant requiring OneSpaWorld to maintain a maximum consolidated total leverage ratio of 4.00 to 1.00, subject to certain exceptions, and a minimum fixed charge coverage ratio of 1.25 to 1.00. Additionally, the New Credit Agreement contains a number of customary negative covenants that restrict, among other things and in each case subject to specified exceptions, OneSpaWorld’s ability to: consummate consolidations, mergers and sales of assets; grant certain liens; incur additional debt; pay certain dividends; and engage in transactions with affiliates.
The New Credit Agreement also contains certain customary representations and warranties, affirmative covenants and events of default. If an event of default occurs, the lenders under the Credit Facilities are entitled to take various actions, including the acceleration of amounts due under the Credit Facilities and all actions permitted to be taken by a secured creditor.
The proceeds from the Credit Facilities were used, together with cash on hand, to repay in full all outstanding indebtedness under the First Lien Credit Agreement (as defined below).
The foregoing descriptions of the Term Loan Facility and the Revolving Facility do not purport to be complete and are qualified in their entirety by the terms and conditions of the New Credit Agreement, which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.
