SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
July 7, 2008 (July 1, 2008)
Date of Report (Date of earliest event reported)
CRAFT BREWERS ALLIANCE, INC.
(Exact Name of Registrant as Specified in Charter)
Washington 0-26542 91-1141254
(State or Other (Commission file number) (I.R.S. Employer
Jurisdiction Identification No.)
of Incorporation)
14300 NE 145th Street, Suite 210
Woodinville, Washington 98072
(Address of Principal Executive Offices, Zip Code)
(425) 483-3232
(Registrant's Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement
On July 1, 2008, Widmer Brothers Brewing Company ("Widmer") merged with and into
Craft Brewers Alliance, Inc., formerly known as Redhook Ale Brewery,
Incorporated (the "Company").
Effective July 1, 2008, the Company entered into a Loan Agreement (the "Loan
Agreement") with Bank of America, N.A. ("BofA"), pursuant to which a $15.0
million revolving line of credit ("Line of Credit") and a $13.5 million term
loan ("Term Loan") are provided. The Company may draw on the Line of Credit for
working capital purposes and general corporate purposes.
The Company may select from one of the following three interest rate benchmarks
as the basis for calculating interest on the outstanding principal balance: the
BofA Prime Rate, the London Inter-Bank Offered Rate ("LIBOR"), or the Inter-Bank
Offered Rate ("IBOR") (each, a "Benchmark Rate"). Interest accrues on the Line
of Credit at an annual rate equal to the Benchmark Rate plus or minus a marginal
rate. The Company may select different Benchmark Rates for different tranches of
its borrowings under the Line of Credit or the Term Loan. The marginal rate
varies according to the Company's funded debt to EBITDA ratio, and either (i)
reduces the BofA's prime rate by 0.50% to 0.25% or (ii) increases IBOR or LIBOR
by 1.125% to 1.500%, provided that, for the period July 1, 2008 through March
31, 2009, LIBOR and IBOR tranches will accrue interest at LIBOR plus 1.75% or
IBOR plus 1.75%. LIBOR rates may be selected for one, two, three, or six month
periods, and IBOR rates may be selected for no shorter than 14 days and no
longer than six months. The Company may not choose the LIBOR or IBOR rate option
for amounts less than $1,000,000.
Monthly interest payments are due on the Line of Credit beginning August 1,
2008. The Line of Credit matures on January 1, 2013 at which time the
outstanding principal balance and any accrued but unpaid interest will be due.
The Line of Credit includes a $2.5 million letter of credit subfacility. An
annual fee will be payable in advance on the outstanding undrawn amount of each
standby letter of credit multiplied by an applicable rate ranging from 1.125% to
1.500%.
The outstanding principal balance owed by Widmer on a term loan with BofA
immediately prior to the merger was refinanced into the Term Loan. Interest on
the Term Loan will accrue on the outstanding principal balance in the same
manner as provided for in the Line of Credit. The current interest rate on the
Term Loan is 4.22%. Interest payments are due monthly beginning August 1, 2008.
Beginning September 2, 2008, principal payments are due monthly in accordance
with an agreed-upon schedule set forth in the Loan Agreement. The unpaid
principal balance plus any accrued interest will be due on July 1, 2018.
A quarterly fee due on the unused portion of the Line of Credit and the unused
portion of the Standby Letter of Credit will accrue at a rate of 0.200% to
0.225%, depending on the Company's funded debt to EBITDA ratio, and will be
payable quarterly, beginning September 30, 2008. In addition, a loan fee of
$25,000 was immediately due and payable in connection with the Term Loan. Fees
will also accrue in connection with waivers or amendments to the Loan Agreement
and any late payments.
2
The Loan Agreement is secured by substantially all personal property held by the
Company and by the real property located at 924 North Russell Street, Portland,
Oregon (the former Widmer brewery) (the "Collateral").
The terms of the Loan Agreement require the Company to meet certain financial
covenants as of the end of each quarter. Failure to meet the covenants is an
event of default and, at its option, BofA could deny a request for a waiver and
declare the entire outstanding loan balance immediately due and payable. The
following table summarizes the financial covenants required by the Loan
Agreement:
Ratio Required by Loan Agreement
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Funded Debt to EBITDA
From July 1, 2008 through September 30, 2008 4.75 to 1
From December 31, 2008 through September 30, 2009 4.0 to 1
From December 31, 2009 through September 30, 2010 3.5 to 1
From December 31, 2010, and thereafter 3.0 to 1
Fixed Charge Coverage Ratio
For the quarter ending September 30, 2008 1.15 to 1
For the quarter ending December 31, 2008 and thereafter 1.25 to 1
In addition, the Company is restricted in its ability to declare or pay
dividends, repurchase any outstanding common stock, acquire additional debt or
enter into any agreement that would result in a change in control of the
Company.
In connection with the Loan Agreement, the Company entered into a notional
interest rate swap agreement with BofA for $10.125 million. The contract
requires the Company to pay interest at a fixed rate of 4.48% and receive
interest at a floating rate of the one-month LIBOR. The effective date of the
interest rate swap agreement is July 1, 2008 and terminates July 1, 2013. This
swap is designed to qualify for hedge accounting under Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 133, Accounting
for Derivative Instruments and Hedging Activities ("SFAS No. 133").
The Company also assumed a $7.0 million notional interest rate swap agreement
with BofA that had been contracted by Widmer and simultaneously entered into an
equal and offsetting hedge. Neither swap qualifies for hedge accounting under
SFAS No. 133. The assumed contract requires the Company to pay interest at a
fixed rate of 4.60% and receive interest at a floating rate of the one-month
LIBOR. The $7.0 million interest rate swap agreement expires on November 1,
2010. The Collateral under the Loan Agreement also secures all swap obligations
with BofA.
3
The foregoing does not purport to be a complete description of the terms of the
Loan Agreement, and is qualified in its entirety by reference to the Loan
Agreement. A copy of the Loan Agreement is attached as Exhibit 10.1 hereto.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation
under an Off-Balance Sheet Arrangement of a Registrant
(a) The information contained in Item 1.01 is incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits
(c) Exhibits
Exhibit Description
No.
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10.1 Loan Agreement dated as of July 1, 2008 between Registrant
and Bank of America, N.A.
4
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.
CRAFT BREWERS ALLIANCE, INC.
Dated: July 7, 2008 By: /s/ JAY T. CALDWELL
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Jay T. Caldwell
Chief Financial Officer and
Treasurer