SVP Worldwide’s term loan lenders have been consulting with counsel from Paul Hastings amid concerns the company will need to negotiate capital structure solutions as it continues to battle liquidity issues, sources tell LFI.
The Platinum Equity-owned manufacturer of sewing machines and related accessories has been struggling with supply chain issues, inflation and high inventory levels. The firm may look to boost its ABL revolver after reporting a drop in its liquidity and cash reserves during the second quarter, LFI previously reported.
SVP booked a 28% year-over-year drop in second quarter adjusted EBITDA to around $7 million, while total revenue in the recent quarter also fell 22% year-over-year to around $74 million, sources added.
As of June 30, the CCC/Caa2 rated company had $9 million available on its $70 million revolver due 2026, and cash and cash equivalents totaled $16 million, down $2 million from the preceding quarter. This can be compared with the $107.5 million in liquidity – split between around $60 million of revolver availability and $47.5 million of cash – the firm had at year-end 2022, according to a recent report by S&P affirming the company’s CCC rating.
The ratings agency also noted the company has become increasingly reliant on its revolver to fund quarterly interest payments on its first-lien term loan.
SVP’s supply chain consists of factories in the US, China, and Europe, though the firm has an external supplier partner that handles a portion of production output, leading to reduced maintenance capex on the company’s end, the sources said.
The term loan due 2028 – originally sized at $370 million with pricing at L+675 – is quoted 76-80 versus 84-88 at the beginning of the year, according to Markit.
Messages left for officials at Paul Hastings were not returned.