What is the sublimit for letters of credit under the Management Recruiters' revolving line of credit?
Management_Recruiters Franchise · 2024 FDDAnswer from 2024 FDD Document
| Three months ended | ||||
|---|---|---|---|---|
| December 31, 2022 | December 31, 2021 | |||
| Franchise royalties | $ | 7,671 | $ 6,067 | |
| Service revenue | 378 | 471 | ||
| Total revenue | 8,049 | 6,538 | ||
| Selling, general and administrative expenses | 4,723 | 4,401 | ||
| Depreciation and amortization | 544 | 486 | ||
| Income from operations | 2,782 | 1,651 | ||
| Other miscellaneous (expense) income | (26) | 724 | ||
| Interest income | 49 | 127 | ||
| Interest and other financing expense | (112) | (90) | ||
| Net income before income taxes | 2,693 | 2,412 | ||
| Provision for income taxes | 49 | 227 | ||
| Net income from continuing operations | 2,644 | 2,185 | ||
| Income from discontinued operations, net of tax | 74 | 9 | ||
| Net income | $ | 2,718 | $ 2,194 | |
| Basic earnings per share | ||||
| Continuing operations | $ | 0.19 | $ 0.16 | |
| Discontinued operations | 0.01 | - | ||
| Total | $ | 0.20 | $ 0.16 | |
| Diluted earnings per share | ||||
| Continuing operations | $ | 0.19 | $ 0.16 | |
| Discontinued operations | 0.01 | - | ||
| Total | $ | 0.20 | $ 0.16 | |
| Weighted average shares outstanding | ||||
| Basic | 13,676 | 13,514 | ||
| Diluted | 61 | 13,741 | 13,635 | #### Note 16 - Subsequent Events |
On February 28, 2023 HireQuest, Inc. (the "Company") and all of its subsidiaries as borrowers (collectively with the Company, the "Borrowers") entered into a Revolving Credit and Term Loan Agreement with Bank of America, N.A. (the "Bank") for a $50 million revolving facility (the "Senior Credit Facility"), which includes a $20 million sublimit for the issuance of standby letters of credit (each a "Letter of Credit"). The Borrowers also have a one-time right, upon at least ten Business Days' prior written notice to the Bank to increase the maximum amount of the Senior Credit Facility to $60 million. The Senior Credit Facility replaces the Company's prior $60 million credit agreement with Truist Bank. The Senior Credit Facility provides for certain financial covenants including an Asset Coverage Ratio of at least 1.0:1.0 at all times; maintaining a Total Funded Debt to Adjusted EBITDA Ratio not exceeding 3.0:1.0; and maintaining, on a consolidated basis, a Fixed Charge Coverage Ratio of at least 1.25:1.0. Interest will accrue on the outstanding balance of the Line of Credit at a variable rate equal to (a) the BSBY Daily Floating Rate plus a margin between 1.00% and 1.75% per annum. In each case, the applicable margin is determined by the Company's Total Funded Debt to Adjusted EBITDA, as defined in the Credit Agreement. The Senior Credit Facility will mature on February 28, 2028.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 65–66)
What This Means (2024 FDD)
According to Management Recruiters' 2024 Franchise Disclosure Document, the company has a revolving credit agreement with Bank of America, N.A. The Senior Credit Facility includes a $20 million sublimit for the issuance of standby letters of credit. This credit agreement replaced a prior $60 million credit agreement with Truist Bank.
Management Recruiters also has a one-time right to increase the maximum amount of the Senior Credit Facility to $60 million upon providing at least ten business days' prior written notice to the Bank. As of December 31, 2023, this right had not been exercised. The Senior Credit Facility matures on February 28, 2028.
As of December 31, 2023, approximately $9.2 million of the Senior Credit Facility was utilized by outstanding letters of credit to secure obligations to their workers' compensation insurance carrier, and $500 thousand was utilized by a letter of credit that secures their paycard funding account.