Item 1.01. Entry Into a Material Definitive Agreement.
Accommodation Agreement
On May 22, 2023, Unique Fabricating, Inc. and its subsidiaries (the “Supplier” or the “Company”) entered into an Accommodation Agreement with General Motors LLC, FCA US LLC, FCA Mexica, S.A. de CV and FCA Canada Inc. and Yanfeng Automotive Interior Systems Co., three of its principal customers (the “Customers”) and Citizens Bank, National Association, in its capacity as the Agent for the financial institutions (the “Lenders” and together with the Agent, (the “Lending Group”)) party to the Amended and Restated Credit Agreement dated November 18, 2018, as amended, including by the Forbearance Agreement described herein (the “Credit Agreement”). Pursuant to and subject to the terms of the Accommodation Agreement, the Customers agreed to provide certain financial and other accommodations to the Supplier and the Lending Group to support on-going operations of and a sale or restructuring process by Supplier.
The Accommodation Agreement will continue until the date that is the earliest of certain events including: (a) the closing of a sale of the Company to a qualified buyer, but only with respect to the Supplier location(s) that are covered by any such transaction; (b) solely as to a Customer exercising its right to terminate the term of the agreement due to the occurrence of an event of default; or (c) October 31, 2023.
The Accommodation Agreement provides for specified price increases to be paid by Customers during the term or other funding to be provided by Customers to the Company through the purchase by Customers of a junior tranche of debt to be established under the Credit Agreement of up to $15 million in the aggregate. Customers also agreed not to exercise certain rights of set off, recoupment, deduction or defense and not to resource production of component parts to other suppliers during the term. The agreement further requires that, within five business days of its execution, Supplier obtain commitments (i) from its seven largest customers (other than Customers) to provide to Supplier economic benefits equal to or greater to those arising under the Accommodation Agreement and (ii) from the remainder of Supplier’s customers to provide Supplier with economic benefits to support its business during the term of the Accommodation Agreement.
The Accommodation Agreement requires Supplier to conduct its operations and business in accordance with an agreed upon budget. The agreement also requires that Supplier commence a process for the sale of its business to a qualified buyer, in accordance with fixed milestones which contemplates completion of the sale process by no later than October 31, 2023. The agreement also requires that the Supplier deliver to each Customer and Agent a restructuring plan within 30 days, appoint a chief restructuring consultant and engage an investment banker.
The Accommodation Agreement contains further provisions to the benefit of the Customers in the event the agreement terminates without a sale or restructuring.
This summary of the Accommodation Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Accommodation Agreement to be filed by amendment as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.
Forbearance Agreement
On May 22, 2023, Unique Fabricating NA, Inc. and Unique-Intasco Canada, Inc. and their parent, Unique Fabricating, Inc. (the “Company”) and their subsidiaries entered into a Forbearance Agreement with respect to the Credit Agreement. The Company has defaulted under the terms and conditions of the Credit Agreement (1) by not paying the outstanding amount of the Loans on the Repayment Date, February 17, 2023, (2) by not paying the quarterly payment due on March 31, 2023, (3) by not timely providing financial statements in violation of the Credit Agreement and (4) by providing inaccurate financial statements for November 2022 (the “Third Specified Events of Default”).
The Lending Group agreed to forbear from exercising their rights to collect payment of the indebtedness until October 31, 2023, subject to earlier termination in certain events or the termination of the Accommodation Agreement, as described above. The Forbearance Agreement is conditioned on, among other things, the Customers entering into the Accommodation Agreement and payment to the Lenders by the Company of the principal reduction payment that was due March 31, 2023 in the amount of $1,228,125, interest that has been invoiced and is overdue, and attorney and advisor fees of the Lenders, all of which have been paid. The Forbearance Agreement creates a Junior Tranche of the revolving line of credit under the Credit Agreement in the amount of up to $15,010,000 to be funded by the sale of junior participation interests in the revolving line of credit to certain customers that are parties to the Accommodation Agreement.
The Forbearance Agreement provides that during the Forbearance Period, the Agent and Lenders will accept fifty percent of the quarterly amortizing loan payments due on June 30, 2023 and September 30, 2023, to be paid in monthly installments. The balance of the payments are deferred until the earlier of a Forbearance Termination Event, as defined, the Maturity Date or repayment of the loans. The agreement also increases the advance rates for Accounts Receivable, Eligible Inventory (raw materials) and Eligible Inventory (finished Goods).
The agreement requires that the Company engage a Chief Restructuring Consultant and appoint an Investment Banker. The Company is required to commence a going concern assets sale in one or more transactions to qualified buyers, as defined, in accordance with a specified schedule with the closing to occur no later than October 31, 2023.
This summary of the Forbearance Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Forbearance Agreement to be filed by amendment as Exhibit 10.2 to this Current Report on Form 8-K and incorporated herein by reference.
Item 9.01. Exhibits.
(d) Exhibits. The following exhibits are filed herewith: