Tower Records amended its revolving credit facility early this month, upping its total credit and reducing the size of its pay-downs in anticipation of the holidays. The company got a relaxed pay down schedule along with larger funding availability. Michael Solomon, ceo, explained that the company sought out the amendment several months ago. "We've had a restructuring plan in place since March," he said. "We sought it out to improve terms with the banks and because of positive performance." Tower Records, based in Sacramento, Calif., owns and operates 173 music stores worldwide. Tower markets movies, music, books, and personal electronics. The deal is due to expire in April 2002.
The amendment gives Tower Records $205 million through Dec. 31 and $195 million thereafter. Originally, credit available under the facility was $195 million from Oct. 1 through Dec. 31 and $100 million thereafter. Prior to the amendment, the company had a $15 million pay down due in October and a $10 million pay down due in December. Under the amendment, the company has $5 million due in October and $10 million due in December. "We did not want to have the December pay-down requirement hanging over our heads," he said. "It was too large to pay out of our cash flows. We are attempting to infuse equity in the company that will allow us to pay the banks."
Pricing did not change on the amended credit, but Solomon declined to reveal it. There were several covenant changes that he said were favorable to the company. "EBITDA covenants were relaxed. Our covenants are tied to a business plan, and some aspects of the business plan were loosened a bit," he said.