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Company Negotiates $65 Million Credit Line From Bank of America –
– Engages Real Estate Advisor to Refine Store Strategy –
LOS ANGELES, Oct. 21, 2010 (GLOBE NEWSWIRE) -- Sport Chalet, Inc. (Nasdaq:SPCHA) (Nasdaq:SPCHB) today announced the next steps in its business strategy, including the signing of a new four-year $65 million credit agreement with Bank of America, N.A.
Craig Levra, Chairman and CEO of Sport Chalet, said, "With its favorable terms, especially in view of an extremely tight credit market, our agreement represents a strong vote of confidence in Sport Chalet by one of the nation's leading lenders. We felt it was prudent to establish a new credit facility well before the previous one was set to mature. The increased borrowing capacity provides us with tremendous flexibility to support our strategic initiatives and to enhance our vendor relationships."
The Company was able to borrow on more favorable terms and conditions. The credit facility has increased availability to $65 million from $45 million and contains revised financial covenants, which gives the Company greater financial flexibility. The new facility also reduces the interest rate, which is expected to reduce interest expense by approximately $800,000 on an annualized basis, based on current borrowing forecasts. The seasonal revolving credit line, from September 1 to December 31, remains unchanged at $70 million. The new agreement extends the expiration date to October 2014.
Bank of America revised the financial covenant regarding earnings before interest, taxes and depreciation (EBITDA). Under the previous facility, the Company was required to maintain a minimum monthly EBITDA on a trailing twelve month basis. To increase the Company's financial flexibility, the revised covenant, which raises the trailing twelve month minimum EBITDA by $500,000 every six months, is only calculated when the Company's availability on the credit facility is below specified amounts. On October 18, 2010, the Company had $16 million in availability, $10 million above the specified amount of $6 million.