Item 2.04 Triggering Events That Accelerate or Increase a Direct Financial
Obligation or an Obligation under an Off-Balance Sheet Arrangement.
On January 16, 2020, AutoWeb, Inc. ("Company" or "AutoWeb") received a notice of
event of default and reservation of rights ("Notice") from PNC Bank, National
Association, as Agent and Lender ("PNC"), under the Revolving Credit and
Security Agreement dated as of April 30, 2019 by and among AutoWeb, PNC, and
AutoWeb's U.S. subsidiaries, Car.com, Inc., Autobytel, Inc., and AW GUA USA,
Inc., as Guarantors, (as amended by the First Amendment, "Credit Agreement"),
advising that an event of default has occurred and is continuing under Section
10.3 of the Credit Agreement by reason of AutoWeb's failure to deliver to PNC
the financial statements and related compliance certificate for the month ended
November 30, 2019. Although not covered by the Notice at this time, AutoWeb also
is not in compliance with the minimum EBITDA financial covenant under the Credit
Agreement.
As a result of the Notice, PNC has increased the interest rate under the Credit
Agreement by 2.0% per annum and PNC may accelerate the obligation to pay all
outstanding balances under the Credit Agreement. As of the filing of this
Current Report on Form 8-K, (i) PNC has not accelerated payment of the
outstanding balances under the Credit Agreement and has not informed AutoWeb
that PNC intends to accelerate payment of the outstanding balances under the
Credit Agreement; and (ii) operations have not been impacted by the Notice
because AutoWeb has been able to access available credit under the Credit
Agreement. However, there can be no assurance that PNC will not exercise its
rights to accelerate payment of outstanding balances under the Credit Agreement
or that the Company will continue to be able to access available credit under
the Credit Agreement. As of the filing of this Current Report on Form 8-K, the
outstanding principal balance under the Credit Agreement was approximately $5.3
million, and AutoWeb maintains $5.0 million in restricted cash under the Credit
Agreement and has an average accounts receivables balance, net of allowances for
bad debts and customer credits, of approximately $24.4 million.
The Notice advises AutoWeb that PNC (i) specifically reserves all rights and
remedies available to it under the Credit Agreement and (ii) does not waive the
event of default or any other event of default that may exist on the date of the
Notice or which may occur thereafter. The Notice further advises that any loans,
advances, and extensions of credit made to AutoWeb from time to time, will be at
the sole discretion of PNC and will not constitute a waiver of the event of
default, or a waiver by PNC of any of its rights under the Credit Agreement or
any collateral agreement.
AutoWeb has been exploring various alternative borrowing and financing options
to replace the credit facility with PNC and, based on its discussions with
potential lenders, AutoWeb believes that it has options available to it to
replace the PNC credit facility. The Company is currently in negotiations with a
potential lender regarding a new credit facility. The potential lender has
conducted its initial diligence on the Company and is proceeding to complete
diligence and prepare loan documentation. The Company's objective is to enter
into a new credit facility promptly upon completion of the lender's process.
There can be no assurance that AutoWeb will come to any agreement regarding a
new credit facility with this lender or any other lender or, if a new credit
facility is entered into with this lender or another lender, when the new credit
facility will close.
The Company filed a copy of the Credit Agreement as Exhibit 10.1 to its Current
Report on Form 8-K filed with the Securities and Exchange Commission ("SEC") on
May 1, 2019 (SEC File No. 001-34761) and a copy of the first amendment to the
Credit Agreement as Exhibit 10.1 to its Current Report on Form 8-K filed with
the SEC on October 30, 2019 (SEC File No. 001-34761).
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