By Jeremiah McWilliams

After warning last month that it would break the covenants relating to a $400 million credit line and a

$150 million senior note agreement, Furniture Brands International Inc. secured looser restrictions from bondholders and creditors this week.

But the temporary deals came at a price.

In exchange for being allowed to have a higher ratio of debt to earnings, the Clayton-based seller of Lane, Broyhill and Thomasville furniture had to offer its personal property — including cash, accounts receivables, inventory, and intangible goodwill — as collateral.

In addition, the 2014 base salary of W.G. “Mickey” Holliman, the company’s chairman and chief executive, was cut 25 percent, to $694,000 from $925,000.

The company will also be allowed to have a lower ratio of earnings to interest expense. The deal was reached Monday but announced today in a Securities and Exchange Commission filing after the close of trading in New York.

In its annual report filed March 1, Furniture Brands said it would likely break the terms of its agreements as of March 31. It said the successful completion of negotiations with lenders would be “necessary to meet our future liquidity requirements.”
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The amendments for covenant relief run only through June 29. The company said it will try to negotiate additional, more permanent amendments or refinancing before that date.

Under the revised credit agreement, Furniture Brands can have no more than $4.25 in debt for every dollar of earnings. Previously, terms did not allow the company to let its debt-to-earnings ratio rise to or above 3.25 to 1.

The company’s “coverage ratio,” a measure of the company’s ability to cover interest and rent expense, will also be relaxed in the credit agreement. Previously, the company had to have $2.75 in consolidated earnings for every dollar of expenses from interest and rent. Now, it will only need to have $1.90 in earnings for every dollar of those expenses.