Californian coffee roaster and retailer Diedrich Coffee entered into a new credit facility this week with United California Bank (UCB), under an agreement that includes a US$3m 30-month term loan.
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The new UCB credit agreement provides for a total financing commitment of US$6.675m, comprised of the US$3m term loan (which was used to repay debt with Fleet National Bank that matured on 3 September), a US$1m equipment acquisition facility, a US$2m expansion facility to fund new coffee house development, and a US$675,000 working capital line of credit facility. The working capital line of credit is subject to a borrowing base formula.
Significant provisions of the agreement include principal repayment amortisation terms for the individual components noted above ranging from 30 to 36 months; interest at a floating rate, at the company’s option, of either LIBOR plus 2.50%, or prime plus 0.75%. The credit facility is secured by all of the assets of the company and its subsidiaries.
According to CFO Matt McGuinness, the new bank financing is a significant milestone for Diedrich Coffee, and a continuation of the work begun two years ago to improve its financial strength and flexibility: “Our new credit facility with UCB is a validation of what we have accomplished over the past two fiscal years. Our focus over that time has been to restructure and significantly reduce the company’s previous bank debt from about US$11m to US$3m, reduce overhead, eliminate unprofitable retail locations and refocus the company on its core strengths and greatest opportunities.”
CEO Phil Hirsch added: “We look forward to a long and mutually beneficial relationship with UCB. We believe it will give Diedrich Coffee significant financial flexibility, which it has lacked for several years now.”
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