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Item 1.01

Entry into a Material Definitive Agreement

(a)          On June 30, 2017, Celadon Group, Inc. (the "Company") entered into a Fifth Amendment to Amended and Restated Credit Agreement (the "Amendment") by and among the Company, certain subsidiaries of the Company as guarantors, Bank of America, N.A., as lender and Administrative Agent (the "Agent"), Wells Fargo Bank, N.A., and Citizens Bank, N.A., both as lenders, which amends the Company's existing Amended and Restated Credit Agreement dated December 12, 2014, among the same parties (as amended, the "Credit Agreement"). Among other changes, the Amendment (i) amended the lease adjusted total debt to EBITDAR ratio and fixed charge coverage ratio financial covenants so that such covenants would not be tested for the twelve-month period ended June 30, 2017 (testing to resume for the twelve-month period ending September 30, 2017); (ii) increased the maximum amount of outstanding indebtedness under the Credit Agreement, including loans and letters of credit, to $226.3 million, with a loan sub-limit of approximately $192 million and a letter of credit sub limit of $35 million; (iii) permitted up to $27 million of additional third party indebtedness secured by Canadian rolling stock; (iv) limited the extent to which defaults under certain other agreements, including vehicle leases and financings, create cross-defaults under the Credit Agreement; (v) increased interest rates on borrowings by 50 basis points; (vi) added a provision requiring lender consent for dispositions or financings of United States real property; (vii) added a provision providing that, in the event of any real property disposition or financing, the maximum amount of indebtedness under the Credit Agreement will be reduced by an amount equal to (A) with respect to any United States real property, the net proceeds of such disposition or financing; and (B) with respect to any Canadian real property, the amount by which the net proceeds of such disposition or financing exceed $25 million; (viii) added a financial covenant under which the Company must maintain a minimum level of adjusted revenue at certain of its subsidiaries; (ix) added additional financial reporting requirements; (x) amended the asset coverage ratio financial covenant to a ratio of 0.70 to 1.00 for periods prior to September 22, 2017, and 1.50 to 1.00 for each week ending thereafter;¹ (xi) added a financial covenant requiring a minimum level of adjusted EBITDAR be maintained, which will be tested monthly on a trailing twelve month basis (commencing with adjusted EBITDAR for the twelve months ending July 31, 2017); (xii) placed a limit on the amount of disbursements that can be made during each approximately 1-month period between the date of the Amendment and September 30, 2017; (xiii) placed limitations on the Company’s ability to modify the terms of its financial advisor and investment banker engagement and added a July 31, 2017 deadline for delivery of certain documents intended to facilitate a refinancing of the Credit Agreement; (xiv) required an amendment fee of $2,263,000, payable 25% upon closing the Amendment and 75% upon repayment in full of the obligations under the Credit Agreement; (xv) added a provision requiring that the proceeds of certain permitted real estate or equipment dispositions or financings involving Canadian assets be used to repay outstanding loans, provided that such proceeds can be reborrowed so long as the existing conditions to borrowing are satisfied; and (xvi) added a requirement that the Company’s Canadian subsidiaries pledge substantially all of their assets as security for the Credit Agreement, subject to certain exceptions for real property and assets encumbered by third party liens.

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The description of the Amendment does not purport to be complete and is qualified in its entirety by the full text of the Amendment, which is filed herewith as Exhibit 10.1.

Item 7.01          Regulation FD Disclosure.

On July 1, 2017, the Company issued a press release discussing the Amendment.  A copy of the press release is attached to this report as Exhibit 99.1.

Item 8.01          Other Events.

Updating Risk Factors

The Company is updating the risk factor disclosure contained in its Annual Report on Form 10-K for the fiscal year ended June 30, 2016, filed with the Securities and Exchange Commission on September 13, 2016, and its Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2016, filed with the Securities and Exchange Commission on February 10, 2017, by adding the following additional risk factor:

 

 

Item 9.01          Financial Statements and Exhibits.

The information contained in Item 7.01 and Exhibit 99.1 of Item 9.01 of this report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

The information contained in Item 7.01 and Exhibit 99.1 of this report contains certain statements that may be considered forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and such statements are subject to the safe harbor created by those sections and the Private Securities Litigation Reform Act of 1995, as amended. Such statements may be identified by their use of terms or phrases, including "expects," "expected," "will," "would be," "intends," "believes," and similar terms and phrases. Forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, which could cause future events and actual results to differ materially from those set forth in, contemplated by, or underlying the forward-looking statements.  In this report, statements relating to the expected refinancing process, expected cash needs, expected covenant compliance, expected financial results and the release thereof, access to additional financing, and operating metric trends, among others, are forward-looking statements.   Actual results may differ from those set forth in the forward-looking statements.  Readers should review and consider factors that could impact results as provided in various disclosures by the Company in its press releases, stockholder reports, and filings with the Securities and Exchange Commission.

 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

EXHIBIT INDEX