Compass Diversified Holdings

11/10/2025 | Press release | Distributed by Public on 11/10/2025 15:32

Material Agreement (Form 8-K)

Item 1.01 Entry into a Material Definitive Agreement
As previously disclosed in a Current Report on Form 8-K filed with the Securities and Exchange Commission (the "SEC") on May 7, 2025 (the "Initial Form 8-K"), Compass Group Diversified Holdings LLC (the "Company") and Compass Diversified Holdings (the "Trust" and, together with the Company, "CODI") indicated its intent to delay the filing of its Quarterly Report on Form 10-Q for the quarter ended March 31, 2025 and disclosed non-reliance on its 2024 financial statements as a result of concerns about financing, accounting, and inventory practices at one of its subsidiaries, Lugano Holding, Inc. ("Lugano"), and irregularities identified in sales, cost of sales, inventory, and accounts receivable recorded by Lugano. Concurrently, the Company also provided notice to Bank of America, N.A. (the "Administrative Agent"), in its capacity as Administrative Agent for the Lenders, Swing Line Lender, and L/C Issuer under that certain Third Amended and Restated Credit Agreement, dated as of July 12, 2022 (as amended, modified, extended, restated, replaced, or supplemented in writing from time to time, the "Credit Agreement"), advising of the existence of potential defaults or events of default under the Credit Agreement in respect of the matters disclosed in the Initial Form 8-K (the "Lugano Events of Default"). In connection with the events described in the Initial Form 8-K, and as previously disclosed on a Current Report on Form 8-K filed with the SEC on May 27, 2025 (the "First Forbearance Form 8-K"), the Company entered into a Forbearance Agreement and Second Amendment to Credit Agreement with the Administrative Agent and the lenders party thereto representing at least 50% of the total credit exposure of all lenders under the Credit Agreement (the "Consenting Lenders"), pursuant to which the lenders under the Credit Agreement agreed to refrain from exercising the rights and remedies available to them with respect to the Lugano Events of Default until 11:59 p.m. (Eastern Time) on July 25, 2025, or the earlier occurrence of certain other specified events (the "First Forbearance Agreement"). Additionally, the First Forbearance Agreement provided for certain amendments to the Credit Agreement, as described in the First Forbearance Form 8-K.
Subsequently, as previously disclosed on a Current Report on Form 8-K filed with the SEC on July 28, 2025 (the "Second Forbearance Form 8-K"), the Company entered into a Second Forbearance Agreement and Third Amendment to Credit Agreement with the Administrative Agent and the Consenting Lenders, pursuant to which the lenders under the Credit Agreement agreed to refrain from exercising the rights and remedies available to them with respect to the Lugano Events of Default until 11:59 p.m. (Eastern Time) on October 24, 2025, or the earlier occurrence of certain other specified events (the "Second Forbearance Agreement"). The Second Forbearance Agreement also provided for certain amendments to the Credit Agreement, as described in the Second Forbearance Form 8-K (the Credit Agreement, as amended by the First Forbearance Agreement and Second Forbearance Agreement, the "Existing Credit Agreement").
Thereafter, as previously disclosed on a Current Report on Form 8-K filed with the SEC on October 10, 2025 (the "Third Forbearance Form 8-K"), the Company entered into a Third Forbearance Agreement with the Administrative Agent and the Consenting Lenders, pursuant to which the lenders under the Credit Agreement agreed to refrain from exercising the rights and remedies available to them with respect to the Lugano Events of Default until 11:59 p.m. (Eastern Time) on November 24, 2025, or the earlier occurrence of certain other specified events (the "Third Forbearance Agreement"). As previously further disclosed on a Current Report on Form 8-K filed with the SEC on November 3, 2025, the lenders under the Existing Credit Agreement, on October 30, 2025, agreed to extend to November 10, 2025 the deadline for delivery of the Company's restated financial statements as specified in the Third Forbearance Agreement.
On November 7, 2025 (the "Effective Date"), the Company entered into a Fourth Forbearance Agreement and Fourth Amendment to Credit Agreement (the "Fourth Forbearance Agreement") with the Administrative Agent and the Consenting Lenders, which replaces the Third Forbearance Agreement. Pursuant to the Fourth Forbearance Agreement, the Consenting Lenders agreed on behalf of all lenders under the Existing Credit Agreement to refrain from exercising rights and remedies available to them with respect to the Lugano Events of Default until the earliest of: (a) the occurrence of any event of default other than a Lugano Event of Default; (b) the breach by the Company of any covenant or provision of the Fourth Forbearance Agreement; (c) the commencement of any remedies by the trustee or any holders of either (i) the Company's 2029 Senior Unsecured Notes based upon any default or event of default under the Indenture dated as of March 23, 2021 between the Company and U.S. Bank National Association, as trustee, or (ii) the 2032 Senior Unsecured Notes based upon any default or event of default under the Indenture dated as of November 27, 2021 between the Borrower and U.S. Bank National Association, as trustee; (d) the failure by the Company to timely deliver the restated audited financials that are required to be delivered to the New York Stock Exchange on or before November 19, 2025 (or such later deadline for delivery as determined by the
New York Stock Exchange); and (e) 11:59 p.m. (Eastern Time) on November 24, 2025 (the period from the Effective Date through the earliest of events (a) through (e) above, the "Forbearance Period").
In connection with the Fourth Forbearance Agreement becoming effective, the Company delivered, among other things, to the Administrative Agent, for distribution to the lenders, an updated budget of the Company's projected receipts and disbursements for the 13-week period following the Effective Date (the "Forbearance Budget"), which Forbearance Budget may be updated as requested by the Company if such update is acceptable to the Administrative Agent in its sole discretion. During the Forbearance Period, the Company cannot utilize the proceeds of collateral or loans for any purpose not contemplated under the Forbearance Budget and the Company's total cash disbursements in any calendar week (excluding disbursements for fees and costs of the Administrative Agent's financial advisor and counsel) cannot exceed the projected total cash disbursements set forth in the Forbearance Budget for such week by more than $1 million in the aggregate.
The Fourth Forbearance Agreement provides that the Company may make Restricted Payments (as defined in the Credit Agreement) during the Forbearance Period to the extent such Restricted Payments are set forth in the Forbearance Budget and after giving effect thereto and the incurrence of any indebtedness in connection therewith the sum of (i) all cash of the Company on deposit with the Administrative Agent or subject to a qualifying control account, plus(ii) unused borrowing availability, is not less than $10,000,000; provided, however, that the forgoing is not the exclusive method by which the Company may make Restricted Payments. The Fourth Forbearance Agreement also requires the Company to deliver (i) the restated audited financials for the fiscal year ended December 31, 2024 and any other fiscal years for which restated financials are prepared, and (ii) the financials for the months ended June 30, 2025, July 31, 2025, August 31, 2025 and September 30, 2025, all on or before November 24, 2025.
During the Forbearance Period, the lenders under the Credit Agreement will honor requests for credit extensions from the Company for revolving loans composed of term SOFR loans with an applicable rate of 2.50% per annum and an interest period of one month; provided, however, that such credit extensions shall not cause the lenders' revolving credit exposures (inclusive of letters of credit obligations) to exceed $60 million
In addition to the forbearance of the lenders described above, the Fourth Forbearance Agreement also amends the Existing Credit Agreement to, among other modifications, provide the Company with greater flexibility in connection with the disposition of Lugano assets and in making financing available to Lugano.
The foregoing description of the Fourth Forbearance Agreement is a summary only and is qualified in its entirety by reference to the complete text of the Fourth Forbearance Agreement, which will be filed as an exhibit to our Quarterly Report on Form 10-Q for the period ended September 30, 2025.
Section 8 Other Events
Item 8.01 Other Events
The Company is continuing discussions with the Administrative Agent and the lenders regarding a waiver of, or other relief from, the Lugano Events of Default. The Company expects that the Fourth Forbearance Agreement will allow these discussions to continue while CODI works to complete the restatement of its financial statements, as disclosed in the Initial Form 8-K, the Form 8-K filed by CODI on June 25, 2025 and CODI's other filings with the SEC. However, CODI cannot make any assurances regarding the timing of the restatement, the potential need to restate additional periods, or whether the Company will be successful in receiving the requested waivers or other relief or future forbearance. If CODI is not successful in these efforts, it would likely have a material adverse effect on CODI's business, financial condition, and results of operations.
Compass Diversified Holdings published this content on November 10, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 10, 2025 at 21:33 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]