Data I/O has arranged a secured revolving credit facility of up to $7.5 million with Western Alliance Bank, with borrowing limited by the value of eligible receivables and inventory. The agreement was signed six days after Data I/O acquired V-Tek and A&J Programming; all three companies are borrowers and share responsibility for repayment.
The facility is intended to support working capital and general business needs. It adds access to borrowing, but also pledges a broad range of company assets and imposes financial and operating restrictions.
Key details
- Borrowing limit: The companies may borrow up to the lesser of $7.5 million or an amount determined by a borrowing base tied to eligible accounts receivable and inventory. Advance rates, an inventory sublimit and reserves can further restrict availability.
- Term and use: Borrowings may be repaid and drawn again through October 26, 2028, when any remaining balance is due. The proceeds are limited to working capital and general business requirements.
- Interest and fees: Interest is payable monthly at 1 percentage point above the applicable prime rate. The agreement sets a 5.75% floor for that reference rate, so the stated minimum borrowing rate is 6.75%. The companies may prepay without penalty. They must also pay a non-refundable $18,750 facility fee at closing and each year on the anniversary.
- Financial requirements: The borrowers must maintain at least $3 million in unrestricted cash on deposit with Western Alliance and meet a minimum fixed-charge coverage ratio of 1.25 to 1.00.
- Collateral and shared liability: Data I/O, V-Tek and A&J are jointly and severally liable, meaning the lender can seek repayment from any of them for the full obligation. The lender receives security interests in a broad set of assets, including receivables, inventory, equipment, deposit accounts and intellectual property, as well as pledged equity interests in subsidiaries.
- Operating restrictions: The agreement limits certain actions, including asset sales, changes of control, mergers and acquisitions, new debt, liens, distributions, investments and transactions with affiliates.
- Default remedies: If the borrowers default, the lender can stop further advances, demand repayment, use setoff rights and collect or take and sell collateral. The borrowers remain liable for any shortfall after collateral is applied.
- Borrowing activity: The agreement establishes the facility, but the announcement does not state whether any funds had been drawn.
Plain-English implications
The facility gives Data I/O and its recently acquired subsidiaries access to a revolving source of working-capital financing, subject to the borrowing-base limit and the agreement’s other conditions. In return, the companies have pledged substantial collateral, committed to maintain cash and coverage levels, and accepted restrictions on financing and certain business actions.