Quarterly report pursuant to Section 13 or 15(d)

Debt

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Debt
 3 Months Ended
Apr. 01, 2024
Debt Disclosure [Abstract]  
Debt Debt
(in thousands) April 1, 2024 January 1, 2024
Term loan $ 51,253  $ 51,253 
Related party note payable 15,100  15,100 
Revolving line of credit 2,000  2,000 
Other notes payable 680  701 
Finance lease liability 2,192  1,576 
Total Debt $ 71,225  $ 70,630 
Less: Unamortized debt discount related party note (574) (612)
Less: Unamortized debt issuance costs (838) (978)
Total Debt, net 69,813  69,040 
Less: Short-term borrowing, including finance leases (53,064) (52,834)
Total Long-term borrowings, including finance leases and related party note payable $ 16,749  $ 16,206 

The Credit Agreement provides the Company with lender financing structured as a $57.8 million term loan and a $4.0 million revolving loan.

On February 1, 2023, the Credit Agreement was amended through the Fourteenth Amendment and subsequently on February 24, 2023 further amended through the Fifteenth Amendment resulting in the Company and its subsidiaries entering into a Secured Promissory Note (the “Note”) with CP7 Warming Bag L.P., an affiliate of L. Catterton Fund L.P., as lender (the “Junior Lender”), pursuant to which the Junior Lender continued that certain delayed draw term loan (the “Delayed Draw Term Loan”) of $10.0 million, under the Credit Agreement, which is junior subordinated secured indebtedness, and also provided $5.1 million of new junior subordinated secured indebtedness, to the Company (collectively the “Junior Indebtedness”), for a total of $15.1 million in junior subordinated secured debt on terms reasonably acceptable to the Required Lenders (as defined in the Credit Agreement), including, without limitation, that (1) such indebtedness shall not mature until at least two (2) years after the maturity date of the credit facility of September 30, 2025; (2) no payments of cash interest shall be made on such indebtedness until after the repayment in full of the obligations under the Credit Agreement; and (3) no scheduled or voluntary payments of principal shall be made until after the repayment in full of the obligations under the Credit Agreement.

On July 7, 2023, the Credit Agreement was amended through the Sixteenth Amendment, which amended the definition of EBITDA for the purposes of expanding the scope of non-recurring items that may be included in the determination of Adjusted EBITDA, as well as modifications to certain covenants for leverage and fixed charge ratios.

As of April 1, 2024, the Company was not in compliance with the minimum liquidity requirement of the Credit Agreement,which constitutes a breach of the Credit Agreement and an event of default. Accordingly, the outstanding balance of the Credit Agreement is included in short-term borrowings together with the short term borrowings, including finance leases in the accompanying consolidated balance sheets.

The Company is not forecasted to have the readily available funds to repay the debt if the lenders do call the debt, which raises substantial doubt about the Company’s ability to continue as a going concern within one year after the date the consolidated financial statements are issued.
As discussed in Note 2 “Summary of Significant Accounting Policies”, the Company received notices from the syndicate of commercial banks under the Credit Agreement that all of the rights, obligations and claims under the Credit Agreement were assigned to TREW. The Company has initiated discussions with TREW with respect to potential solutions regarding the event of default described above.

The terms of the Credit Agreement as amended require the Company to repay the principal of the term loan in quarterly installments, and pay the outstanding balance on the revolving line of credit at maturity; however, due to event of default we classified all of the principal as payable within the next nine months as follows:
in thousands
2024 $ 53,253 
2025 — 
2026 — 
2027 15,100 
2028 — 
Total $ 68,353 

The Credit Agreement, including the term loan and revolving line of credit, is secured by substantially all of the Company’s assets and incurs interest on outstanding amounts at the following rates per annum through maturity:

Time Period Interest Rate
From January 1, 2024 through June 15, 2024 7.25%
From June 16, 2024 through maturity 7.75%

The Delayed Draw Term Loan is a non-interest bearing loan and, accordingly, was recorded at fair value as part of the Anthony’s acquisition which resulted in a debt discount of approximately $1.3 million, which is being amortized over the period of the Delayed Draw Term Loan. The Company recorded debt discount amortization of $0.1 million for each of the quarters ended April 1, 2024 and April 3, 2023, which is included within interest expense in the accompanying consolidated statements of operations.

The Junior Indebtedness, which accrues interest at 4% per annum (i) is secured by a second lien on substantially all of the assets of the Company and the subsidiary guarantors (the “Guarantors”) pursuant to the terms and that certain Guaranty and Security Agreement, dated February 24, 2023, by and among the Guarantors and the Junior Lender, (ii) is subject to the terms of that certain Intercreditor and Subordination Agreement dated February 24, 2023, by and between the Administrative Agent and the Junior Lender and acknowledged by the borrowers and the Guarantors, and (iii) matures on the date that is the second anniversary of the maturity date under the Credit Agreement (the “Junior Maturity Date”) (September 30, 2027, based on the maturity date under the Credit Agreement of September 30, 2025).

Under the terms of the Junior Indebtedness, no payments of cash interest or payments of principal shall be due until the Junior Maturity Date, and no voluntary prepayments may be made on the Junior Indebtedness prior to the Junior Maturity Date until after the repayment in full of the obligations under the Credit Agreement.

The Company had $14.5 million recorded, net of unamortized discount under the Junior Indebtedness as of April 1, 2024 and January 1, 2024, respectively, included in Related party note payable in the accompanying consolidated balance sheets.

The amendments to the Credit Agreement and the Delayed Draw Term Loan were accounted for as modifications of debt in the Company’s accompanying consolidated financial statements.

For the quarter ended April 1, 2024 and April 3, 2023, interest expense consisted of:
Quarter Ended
(in thousands) April 1, 2024 April 3, 2023
  Interest on credit agreement $ 483  $ 1,051 
  Interest on related party note 689  — 
  Amortization of debt issuance costs 139  106 
  Amortization of related party note discount 38  39 
  Non-cash interest on redeemable preferred stock 1,106  1,022 
  Other interest expense (income) 22  (140)
$ 2,477  $ 2,078