Item 1.01. Entry into a Material Definitive Agreement.
As previously reported, on February 17, 2020 (the "Petition Date"), Pier 1
Imports, Inc. ("Pier 1") and all of its subsidiaries (together with Pier 1, the
"Debtors"), filed voluntary petitions (the "Chapter 11 Cases") for
reorganization under Chapter 11 of the U.S. Bankruptcy Code (the "Bankruptcy
Code") in the U.S. Bankruptcy Court for the Eastern District of Virginia (the
"Bankruptcy Court"). The Chapter 11 Cases are being jointly administered under
the caption In re Pier 1 Imports, Inc., et al., No 20-30805 (KRH). Capitalized
terms used but not otherwise defined in this Current Report on Form 8-K will
have the meaning given to them in the DIP Credit Agreement (as defined below).
"Debtor-in-Possession" Credit Facility
On February 20, 2020, Pier 1 entered into a Senior Secured Super-Priority Debtor
in Possession Credit Agreement, by and among Pier 1 Imports (U.S.), Inc., as
borrower, the guarantors party thereto, Bank of America, N.A., as administrative
agent and collateral agent, Pathlight Capital LP (or an affiliated debt fund),
as administrative agent for the ABL term lenders, and the lender parties thereto
(the "DIP Credit Agreement").
The DIP Credit Agreement provides for approximately $256 million in
superpriority secured debtor-in-possession credit facilities comprising of:
(i) a superpriority revolving credit facility in an aggregate amount of
$200 million (the "Revolving Facility"); (ii) a superpriority FILO loan facility
in an aggregate amount of $15 million (the "FILO Facility"); and (iii) a
superpriority ABL term loan facility in an aggregate principal amount of
approximately $41 million (the "ABL Term Loan Facility" and, together with the
Revolving Facility and the FILO Facility, the "DIP Facilities"), subject to the
terms and conditions set forth therein.
The proceeds of the DIP Facilities will be used, in part, to refinance in full
the Debtors' prepetition ABL credit facility and provide incremental liquidity
for working capital and letters of credit, administrative costs, premiums, fees
and expenses of administering the Chapter 11 Cases, payment of court approved
prepetition obligations and other such purposes consistent with the DIP
Facilities and the budget or as otherwise approved by the agent and lenders.
The maturity date of the DIP Facilities is August 20, 2020. Loans under the
Revolving Facility will bear interest at: (1) 2.00% plus a base rate of the
highest of (a) the rate of interest in effect for such day as publicly announced
from time to time by Bank of America, N.A. as its "prime rate", (b) the Federal
Funds Effective Rate for such day, plus 0.50%, and (c) the LIBO Rate for a one
month interest period as determined on such day, plus 1.00% (the "Base Rate");
or (2) 3.00% plus the LIBO Rate. Loans under the FILO Facility will bear
interest at (a) 3.50% plus the Base Rate, or (b) 4.50% plus the LIBO Rate. Loans
under the ABL Term Loan Facility will bear interest at the 3 month LIBO Rate,
plus 8.00%. From and after the Effective Date, a non-refundable unused
commitment fee will accrue at the rate of 0.375% per annum on the daily average
unused portion of the Revolving Facility (whether or not then available).
The Debtors' obligations under the DIP Credit Agreement are guaranteed by Pier 1
and each of the other Debtors and are secured by substantially all of the real
and personal property of the Debtors, subject to certain exceptions. The DIP
Credit Agreement includes customary negative covenants for
debtor-in-possessionloan agreements of this type, including covenants limiting
Pier 1's and its subsidiaries' ability to, among other things, incur additional
indebtedness, create liens on assets, make investments, loans or advances,
engage in mergers, consolidations, sales of assets and acquisitions, pay
dividends and distributions and make payments in respect of junior or
pre-petition indebtedness, in each case subject to customary exceptions for
debtor-in-possession loan agreements of this type.
The DIP Credit Agreement also includes certain customary representations and
warranties, affirmative covenants and events of default, including, but not
limited to, payment defaults, breaches of representations
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and warranties, covenant defaults, certain events under ERISA, unstayed
judgments in favor of a third party involving an aggregate liability in excess
of $1 million, change of control, specified governmental actions having a
material adverse effect and condemnation or damage to a material portion of the
collateral. Certain bankruptcy-related events are also events of default,
including, but not limited to, the dismissal by the Bankruptcy Court of any of
the Chapter 11 Cases, the conversion of any of the Chapter 11 Cases to a case
under Chapter 7 of the Bankruptcy Code, the appointment of a trustee pursuant to
Chapter 11 of the Bankruptcy Code, failure to enter the final order approving
the DIP Facilities by March 13, 2020, and certain other events related to the
impairment of the DIP Lenders' rights or liens granted under the DIP Credit
Agreement. Pier 1's senior secured term loan facility that matures on April 30,
2021 ("Term Loan Facility") continues to be outstanding. As of February 21,
2020, the Company had $189 million outstanding under the Term Loan Facility.
On February 18, 2020, the Debtors filed a motion for the approval of the DIP
Facilities with the Bankruptcy Court, which was granted on the record.
The foregoing description of the DIP Credit Agreement does not purport to be
complete and is qualified in its entirety by reference to the full text of the
DIP Credit Agreement, which is attached as Exhibit 10.1 hereto and incorporated
by reference herein.
Item 2.03. Creation of a Direct Financial Obligation or Obligation under an Off
Balance Sheet Arrangement of a Registrant.
The information set forth in Item 1.01 regarding the DIP Facilities and DIP
Credit Agreement is incorporated by reference into this Item 2.03.
Item 3.01. Notice of Delisting or Failure to Satisfy a Continued Listing Rule or
Standard; Transfer of Listing.
On February 18, 2020, Pier 1 was notified by the staff of New York Stock
Exchange ("NYSE") Regulation providing that it had determined to commence
proceedings to delist the common stock of Pier 1 from the NYSE and that trading
in Pier 1 common stock would be suspended immediately.
NYSE Regulation reached its decision that Pier 1 is no longer suitable for
listing pursuant to NYSE Listed Company Manual Section 802.01D after Pier 1's
disclosure on February 17, 2020 that it has commenced voluntary Chapter 11
proceedings in the Bankruptcy Court. The letter also indicated that the NYSE's
application to the Securities and Exchange Commission ("SEC") to delist the
common stock is pending, subject to the completion of all applicable procedures,
including any appeal by Pier 1 to the NYSE Regulation's decision.
Pier 1 does not intend to appeal the determination and, therefore, it is
expected that the common stock will be delisted. Trading of Pier 1's common
stock has commenced on the OTC Bulletin Board or "pink sheets" market under the
symbol "PIRRQ". The transition does not affect Pier 1's operations or business
and does not change its reporting requirements under SEC rules.
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Cautionary Statement Concerning Forward-Looking Statements
Certain statements contained in this report may constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Pier 1 and the other Debtors
may also make forward-looking statements in other reports filed with the United
States Securities and Exchange Commission ("SEC"), in press releases, in
presentations and in material delivered to Pier 1's shareholders.
Forward-looking statements provide current expectations of future events based
on management's assumptions and assessments in light of past experience and
trends, current economic and industry conditions, expected future developments,
and other relevant factors. These statements encompass information that does not
directly relate to any historical or current fact and often may be identified
with words such as "believe," "expect," "estimate," "anticipate," "plan," "may,"
"will," "intend" and other similar expressions.
Management's expectations and assumptions regarding: risks and uncertainties
relating to the Chapter 11 Cases, including but not limited to, Pier 1's ability
to obtain Bankruptcy Court approval with respect to motions in the Chapter 11
Cases; the effects of the Chapter 11 Cases on Pier 1 and on the interests of
various constituents; Bankruptcy Court rulings in the Chapter 11 Cases and the
outcome of the Chapter 11 Cases in general; the length of time the Debtors will
operate under the Chapter 11 Cases; risks associated with third-party motions in
the Chapter 11 Cases; the potential adverse effects of the Chapter 11 Cases on
Pier 1's liquidity or results of operations and increased legal and other
professional costs necessary to execute the Debtors' reorganization; Bankruptcy
Court approval of the Debtors' proposed debtor in possession financing; the
conditions to which Pier 1's debtor in possession financing is subject and the
risk that these conditions may not be satisfied for various reasons, including
for reasons outside of the Debtors' control; Pier 1's ability to consummate
sales of its assets and the terms and conditions of any such sales; the
effectiveness of Pier 1's marketing campaigns, merchandising and promotional
strategies and customer databases; consumer spending patterns; inventory levels
and values; the effectiveness of Pier 1's relationships with, and operations of,
its key suppliers; risks related to changes in U.S. policy related to imported
merchandise, particularly with regard to the impact of tariffs on goods imported
from China and strategies undertaken to mitigate such impact; changes in foreign
currency values relative to the U.S. dollar; Pier 1's ability to retain its
senior management team; continued volatility in the price of Pier 1's common
stock; Pier 1's ability to comply with the terms of the DIP Credit Agreement;
the expected delisting of Pier 1 common stock from the NYSE; and other future
results are subject to risks, uncertainties and other factors that could cause
actual results to differ materially from the anticipated results or other
expectations expressed in the forward-looking statements.
Additional risks and uncertainties that may affect the Debtors operations and
performance include, among others: the failure by Pier 1 to identify, develop
and successfully implement immediate action plans and longer-term strategic
initiatives; the inability of Pier 1 to anticipate, identify and respond to
changing customer trends and preferences for home décor and furniture and to
identify, source, ship and deliver items of acceptable quality to its U.S.
distribution and fulfillment centers, stores and customers at reasonable prices
and rates in a timely fashion; risks related to outsourcing certain business
processes to third-party vendors, including disruptions in business, cyber
security threats and increased costs; an overall decline in the health of the
U.S. economy and its impact on consumer confidence and spending; disruptions in
Pier 1's domestic supply chain or e-Commerce website; failure to successfully
manage and execute Pier 1's marketing initiatives; negative impacts from a
failure to control merchandise returns and recalls; potential impairment charges
on certain long-lived assets; Pier 1's access to adequate operating cash flow,
trade credit, borrowed funds and capital to fund its operations and pay its
obligations as they become due, including the impact of continued deterioration
of Pier 1's financial performance or adverse trends or disruption in the global
credit and equity markets; the highly competitive retail environment with
companies offering similar specialty home merchandise; factors affecting
consumer spending, including employment levels and disposable income, interest
rates, consumer debt levels, fuel and transportation costs and other factors; an
inability to operate in desirable locations at reasonable rental rates and to
close underperforming stores at or before the completion
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of their lease terms; failure to attract, motivate and retain an effective
management team or changes in the cost or availability of a suitable workforce;
failure to successfully manage omni-channel operations; seasonal variations;
increases in costs that are outside Pier 1's control; adverse weather conditions
and natural disasters; risks related to Pier 1's dependence on technology in the
operation of its business; failure to protect consumer data; failure to
successfully implement new information technology systems and enhance existing
systems; risks related to cybersecurity and e-Commerce related fraud; failure to
maintain positive brand perception and recognition; risks related to imported
merchandise including the health of global, national, regional, and local
economies and their impact on vendors, manufacturers and merchandise; factors
beyond Pier 1's control, including general economic and market conditions,
fluctuations in Pier 1's financial condition or other factors that could affect
the common stock price; risks related to actions by activist shareholders;
regulatory and legal risks; and litigation risks.
Pier 1 assumes no obligation to update or otherwise revise its forward-looking
statements even if experience or future changes make it clear that any projected
results expressed or implied will not be realized. Additional information
concerning these risks and uncertainties is contained in Pier 1's Annual Report
on Form 10-K for the fiscal year ended March 2, 2019, as filed with the SEC and
in Pier 1's other filings with the SEC.
Item 9.01. Financial Statements and Exhibits.
(a) - (c) Not applicable.
(d) Exhibits.
Exhibit
No. Description
10.1 Senior Secured Super-Priority Debtor in Possession Credit Agreement,
dated as of February 20, 2020 by and among Pier 1 Imports (U.S.),
Inc., as borrower, the guarantors party thereto, Bank of America,
N.A., as administrative agent and collateral agent, Pathlight Capital
LP (or an affiliated debt fund), as administrative agent for the ABL
term lenders, and the lender parties thereto.
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