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Karat Packaging Inc. (NASDAQ:KRT), a manufacturer of disposable foodservice products, recently revised the terms of its existing line of credit with Hanmi Bank. The amendment, effective March 3, 2025, has significant changes for the company’s financial structure. According to InvestingPro data, the company maintains a strong financial health score of "GREAT," with liquid assets significantly exceeding short-term obligations at a current ratio of 3.12.
The updated agreement extends the maturity of the line of credit by over two years, setting the new expiration date at March 14, 2027. Additionally, the borrowing capacity under the revolving loan facility has been halved from $40 million to $20 million. This reduction aligns with the company’s moderate debt profile, as InvestingPro data shows total debt-to-capital ratio at just 14%, indicating conservative leverage management.
Interest rates for borrowings on the line of credit are now tied to the Secured Overnight Financing Rate (SOFR), with an added margin of 2.25% and a minimum SOFR of 1.00%. The adjustment to a SOFR-based interest rate aligns the company’s credit terms with current financial market practices following the broader transition away from LIBOR.
The details of this amended credit agreement are outlined in the 8-K filing with the Securities and Exchange Commission and are based on the Change In Terms Agreement dated February 24, 2025, between Lollicup USA Inc., a subsidiary of Karat Packaging (NYSE:PKG), and Hanmi Bank.
Investors and stakeholders in the plastics products industry may view these changes as strategic financial management actions by Karat Packaging. The decision to extend the credit facility’s maturity and adjust its borrowing limit and interest rate may influence the company’s liquidity and financial flexibility in the coming years. For deeper insights into KRT’s financial health and future prospects, including additional ProTips and comprehensive metrics, investors can access the full research report on InvestingPro, which covers over 1,400 US stocks with detailed analysis and actionable intelligence.
The information in this article is sourced from a press release statement filed with the SEC.
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