To keep its lenders at bay, Tasty Baking Co. must show improving sales and earnings over the next six months, according to details of the amended credit lines reached last week and disclosed in a regulatory filing Tuesday.
The Philadelphia baker of Tastykakes, which has struggled to gain promised cost savings from its new bakery in South Philadelphia, announced Jan. 5 that it was in a financial squeeze, largely from the enormous debt it had taken on.
Last week, Tasty Baking gained some breathing room from its lenders, led by Citizens Bank of Pennsylvania, under which it will not have to pay any principal or interest on its $100 million credit lines until the end of June.
The City of Philadelphia, the Commonwealth of Pennsylvania and private investors supplied $6.5 million in new debt financing as well.
However, that only buys Tasty Baking time, because the lenders are requiring the company to pursue a possible sale.
A Securities and Exchange Commission document filed by Tasty Baking shows that about $83.7 million was outstanding under its $100 million in credit lines as of Jan. 13.
The amended agreement requires Tasty Baking to maintain certain levels of financial performance, including earnings before interest, taxes, depreciation and amortization.
For the three months ending March 26, the minimum amount of EBITDA required by lenders is $3.2 million. For the the six months ending June 25, Tasty Baking must have EBITDA of at least $9.3 million.
Tasty Baking must also maintain a minimum level of cumulative gross sales as of certain dates. The schedule filed shows those sales, measured over 13-week periods, must be growing. For the 13 weeks ending March 26, gross sales must be at least $72.3 million.