As of September 30, 2023, was Aunt Millies Bakeries in compliance with its credit agreement covenants?
Aunt_Millies_Bakeries Franchise · 2025 FDDAnswer from 2025 FDD Document
| Routes held for sale | $ | 1,720,086 | $ | 1,518,530 |
|---|---|---|---|---|
| Deferred revenue | 1,399,000 | 1,438,000 | ||
| (Losses)/Gains recognized from sale of territories and delivery trucks | (170,920) | 101,929 | ||
| Interest income from distributor notes receivable (reflected in | ||||
| other income on the consolidated income statements) | 485,497 | 507,885 | ||
| Company repurchase obligation for territories previously sold | 440,000 | 219,000 | ||
| Interest rate on notes receivable – distributor routes | 8.75 | % to 9.75% | 8.75 | 5% to 9.75% |
NOTE 5 - DEBT ARRANGEMENTS
The Company had a Credit and Security Agreement ("Credit and Security Agreement") with a commercial lender. The Credit and Security Agreement provided a term loan of $8,000,000, advances in the form of a revolving loan up to $25,000,0000, and letters of credit up to $2,500,000. The term loan required monthly principal payments of $95,238 beginning June 1, 2021. The term loan, revolving loan, and letters of credit was set to mature November 30, 2023. All unpaid principal and interest was due upon maturity.
In December 2022, the Company amended their Credit and Security Agreement ("Amended Credit and Security Agreement") whereby the term loan, revolving loan, and letters of credit maturities were extended to March 2025. The term loan monthly principal payments of $95,238 continue and any remaining outstanding borrowings are due upon maturity.
The term loan, revolving loan, and letters of credit bear interest at a variable rate for varying amounts based on LIBOR or a rate not to exceed the prime rate, both rates adjusted by a factor tied to a quarterly financial performance ratio. Availability under the revolvin
Source: Item 23 — RECEIPT (FDD pages 44–196)
What This Means (2025 FDD)
According to Aunt Millies Bakeries's 2025 Franchise Disclosure Document, as of September 30, 2023, the company was in compliance with its credit agreement covenants. The document states that the effective interest rate of the term loan and revolving loan approximated 5.67% at September 30, 2023. Additionally, the amount outstanding on the revolving loan was $0 at September 30, 2023.
The Credit and Security Agreement with a commercial lender included a term loan of $8,000,000, advances in the form of a revolving loan up to $25,000,000, and letters of credit up to $2,500,000. The term loan required monthly principal payments of $95,238 beginning June 1, 2021.
In December 2022, Aunt Millies Bakeries amended their Credit and Security Agreement, extending the maturities of the term loan, revolving loan, and letters of credit to March 2025. The continued adherence to these terms and the absence of outstanding balances on the revolving loan and letters of credit at the specified date suggest compliance with the covenants of the agreement.