Compass Diversified (NYSE: CODI) amends credit deal with waivers, higher leverage fees

Rhea-AI Filing Summary

Compass Diversified Holdings and its operating LLC amended their main credit agreement on December 19, 2025 through a Fifth Amendment and related transaction letter with Bank of America and lenders. The lenders agreed to waive certain past events of default tied to financial covenants and issues related to subsidiary Lugano Holding, Inc., which has filed for Chapter 11 protection in Delaware. Revolving commitments revert to $100,000,000, and loan interest margins now vary with the consolidated total leverage ratio.

The Company must use 100% of net cash from any asset dispositions or deleveraging transactions to repay debt and provide rolling 13-week cash flow forecasts every two weeks, including a separate Lugano cash flow budget. Management fees are capped at $15,000,000 per quarter, and most restricted payments over $10,000,000 per quarter require leverage at or below 4.50:1.00. If leverage is not less than 4.50:1.00 at specified quarter-ends from June 30, 2026 through March 31, 2027, the Company must pay milestone fees rising from $5,000,000 to $9,500,000.

Positive

• None.

Negative

• Covenant breaches and waivers: Lenders are waiving prior events of default tied to financial covenants and issues involving Lugano, highlighting past non-compliance and stress in the capital structure.
• Tighter lender controls and cash sweep: 100% of net cash from dispositions or deleveraging deals must go to debt repayment, with frequent 13-week cash flow reporting and constraints on management fees and restricted payments.
• Leverage-triggered milestone fees: If the consolidated total leverage ratio is not less than 4.50:1.00 at quarter-ends from June 30, 2026 through March 31, 2027, CODI must pay escalating fees from $5,000,000 to $9,500,000, increasing potential cash outflows if leverage stays high.

Insights

Credit and capital structure analyst

CODI secured covenant waivers but accepted tighter terms, high reporting demands, and leverage-based fees.

The Fifth Amendment resolves certain existing events of default under the credit agreement, including those linked to financial covenants and to subsidiary Lugano, which is in Chapter 11. In exchange, revolving commitments reset to $100,000,000 and interest margins on SOFR and base rate loans are explicitly tied to the consolidated total leverage ratio, which can raise borrowing costs at higher leverage.

Covenants become more restrictive: CODI must apply 100% of net cash proceeds from any disposition or deleveraging transaction to debt repayment, provide detailed rolling 13‑week cash flow forecasts every two weeks, and furnish a specific Lugano DIP budget and related documents. Management fees are capped at $15,000,000 per quarter, and restricted payments above $10,000,000 per quarter are allowed only when leverage is at or below 4.50:1.00.

The transaction letter adds leverage-contingent milestone fees: if the consolidated total leverage ratio is not less than 4.50:1.00 at the quarter-ends on June 30, 2026, September 30, 2026, December 31, 2026, and March 31, 2027, CODI must pay escalating fees of $5,000,000, $6,500,000, $8,000,000, and $9,500,000, respectively. These terms, plus required lender consent for changes to the Lugano DIP budget and related documents, signal closer lender oversight and potential incremental cash costs if leverage remains elevated.

8-K Event Classification

3 items: 1.01, 7.01, 9.01

3 items

Item 1.01 Entry into a Material Definitive Agreement Business

The company signed a significant contract such as a merger agreement, credit facility, or major partnership.

Item 7.01 Regulation FD Disclosure Disclosure

Material non-public information disclosed under Regulation Fair Disclosure, often investor presentations or guidance.

Item 9.01 Financial Statements and Exhibits Exhibits

Financial statements, pro forma financial information, and exhibit attachments filed with this report.

Understanding 8-K Material Events →

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 19, 2025

COMPASS DIVERSIFIED HOLDINGS

(Exact name of registrant as specified in its charter)

Delaware

001-34927

57-6218917

(State or other jurisdiction of incorporation)

(Commission File Number)

(I.R.S. Employer Identification No.)

COMPASS GROUP DIVERSIFIED HOLDINGS LLC

(Exact name of registrant as specified in its charter)

Delaware

001-34926

20-3812051

(State or other jurisdiction of incorporation)

(Commission File Number)

(I.R.S. Employer Identification No.)

301 Riverside Avenue, Second Floor, Westport, CT 06880

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (203) 221-1703

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐			Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐			Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐			Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐			Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Shares representing beneficial interests in Compass Diversified Holdings

CODI

New York Stock Exchange

Series A Preferred Shares representing beneficial interests in Compass Diversified Holdings

CODI PR A

New York Stock Exchange

Series B Preferred Shares representing beneficial interests in Compass Diversified Holdings

CODI PR B

New York Stock Exchange

Series C Preferred Shares representing beneficial interests in Compass Diversified Holdings

CODI PR C

New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Section 1						Registrant's Business and Operations
Item 1.01						Entry into a Material Definitive Agreement

On December 19, 2025, Compass Group Diversified Holdings LLC (the “Company”) entered into a Fifth Amendment to Credit Agreement and Limited Waiver Agreement (the “Fifth Amendment”) and a Fifth Amendment Transaction Letter (the “Transaction Letter”), each with 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”), and the lenders party to the Credit Agreement representing at least 50% of the total credit exposure of all lenders under the Credit Agreement (the “Consenting Lenders”). Pursuant to the Fifth Amendment, among other things, (i) the lenders will waive certain events of default that had occurred and were continuing prior to the Fifth Amendment, which include the events of default relating to certain financial covenants and/or Lugano Holding, Inc. (“Lugano”), the Company’s subsidiary which was the subject of a recently completed investigation, (ii) the aggregate revolving commitments under the Credit Agreement will revert back to $100,000,000, (iii) SOFR loans will bear interest at a rate per annum equal to the term SOFR, plus a margin ranging from 1.50% to 3.25% based on the Consolidated Total Leverage Ratio (as defined in the Credit Agreement), and base rate loans will bear interest at a rate per annum equal to the base rate, plus a margin ranging from 0.50% to 2.25% based on the Consolidated Total Leverage Ratio, (iv) the Company is required to repay 100% of the net cash proceeds received in respect of any Disposition (as defined in the Credit Agreement) or Deleveraging Transaction (as defined in the Transaction Letter), (v) the Company is required to deliver to the Administrative Agent a rolling 13-week forecast of cash flows every two weeks, together with a report showing a comparison of actual cash flows with recent forecast and an explanation of certain variances exceeding 10%, (vi) the Company is required to deliver to the Administrative Agent an updated budget consisting of a minimum 13-week cash flow forecast of Lugano entities (the “Lugano DIP Budget”) and certain other documents relating to the filing for protection by Lugano and certain of its subsidiaries under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware on November 17, 2025 (the “Lugano Bankruptcy”), (vii) the Company is permitted to make investments, incur indebtedness and make Dispositions relating to the Deleveraging Transaction so long as no default or event of default exists or would result therefrom, (viii) the Company is restricted from paying its manager management fees exceeding $15,000,000 in any fiscal quarter, (ix) the Company is restricted from making certain Restricted Payments (as defined in the Credit Agreement) in excess of $10,000,000 in any fiscal quarter unless the Consolidated Total Leverage Ratio is less than or equal to 4.50:1.00, (x) the Company’s financial covenants with respect to its Consolidated Total Leverage Ratio, Consolidated Senior Secured Leverage Ratio (as defined in the Credit Agreement) and Consolidated Fixed Charge Coverage Ratio (as defined in the Credit Agreement) are revised for the periods after the quarter ending March 31, 2025, and (xi) the modification of the Lugano DIP Budget and certain documents in connection with the Lugano Bankruptcy and the Company’s debtor-in-possession loan to Lugano will require the prior written consent of the Administrative Agent or both the Administrative Agent and the Consenting Lenders.

Pursuant to the Transaction Letter, among other things, if the Consolidated Total Leverage Ratio of the Company is not less than 4.50:1.00 as of the last day of the fiscal quarters ending June 30, 2026, September 30, 2026, December 31, 2026 and March 31, 2027, respectively, the Company is required to pay to the Administrative Agent, for the ratable benefit of the lenders, the milestone fees in the amount of $5,000,000, $6,500,000, $8,000,000 and $9,500,000, respectively, subject to certain conditions.

The foregoing descriptions of the Fifth Amendment and the Transaction Letter are a summary only and are qualified in their entirety by reference to the complete text of the Fifth Amendment and the Transaction Letter, which are attached hereto as Exhibits 10.1 and 10.2, respectively, and are incorporated herein by reference.

Section 7     Regulation FD Disclosure

Item 7.01    Regulation FD Disclosure

On December 19, 2025, CODI issued a press release announcing entry into the Fifth Amendment. A copy of the press release is attached as Exhibit 99.1 hereto.

The foregoing description of the press release is qualified in its entirety by reference to the complete text of the press release furnished as Exhibit 99.1 hereto, which is incorporated by reference herein. The information in this Item 7.01 and Exhibit 99.1 is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall

it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth in such filing.

Section 9     Financial Statements and Exhibits

Item 9.01    Financial Statements and Exhibits

(d)    Exhibits.

Exhibit Number						Description
10.1						Fifth Amendment to Credit Agreement and Limited Waiver Agreement, dated December 19, 2025, by and among Compass Group Diversified Holdings LLC, the Lenders party thereto, and Bank of America, N.A., in its capacity as Administrative Agent for the Lenders, Swing Line Lender and L/C Issuer
10.2						Fifth Amendment Transaction Letter, dated December 19, 2025, by and among Compass Group Diversified Holdings LLC, the Lenders party thereto, and Bank of America, N.A., in its capacity as Administrative Agent for the Lenders, Swing Line Lender and L/C Issuer
99.1						Press Release of CODI dated December 19, 2025
104						Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: December 19, 2025			COMPASS DIVERSIFIED HOLDINGS
			By:						/s/ Stephen Keller
									Stephen Keller
									Regular Trustee

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: December 19, 2025			COMPASS GROUP DIVERSIFIED HOLDINGS LLC
			By:						/s/ Stephen Keller
									Stephen Keller
									Chief Financial Officer

FAQ

What did Compass Diversified (CODI) change in its credit agreement on December 19, 2025?

On December 19, 2025, Compass Group Diversified Holdings LLC entered into a Fifth Amendment and a Fifth Amendment Transaction Letter with Bank of America and lenders. The amendment waives certain past events of default, resets revolving commitments to $100,000,000, revises interest margins based on the consolidated total leverage ratio, tightens covenants, and adds leverage-based milestone fees.

How does the Fifth Amendment affect CODIs borrowing costs and leverage covenants?

Under the Fifth Amendment, SOFR loans bear interest at term SOFR plus a margin of 1.50% to 3.25%, and base rate loans bear interest at the base rate plus 0.50% to 2.25%, in each case based on the consolidated total leverage ratio. The financial covenants for the consolidated total leverage ratio, consolidated senior secured leverage ratio, and consolidated fixed charge coverage ratio are also revised for periods after the quarter ending March 31, 2025.

What new cash flow and reporting requirements does CODI face under the amended credit terms?

CODI must deliver to the administrative agent a rolling 13-week cash flow forecast every two weeks, plus a report comparing actual cash flows to the recent forecast and explaining variances exceeding 10%. It also must provide an updated Lugano DIP Budget, including at least a 13-week cash flow forecast for Lugano entities and other documents related to the Lugano Bankruptcy.

How do the new restrictions impact CODIs management fees and shareholder distributions?

The amendment restricts CODI from paying its manager management fees above $15,000,000 in any fiscal quarter. It also limits certain restricted payments to no more than $10,000,000 per fiscal quarter unless the consolidated total leverage ratio is less than or equal to 4.50:1.00.

What are the leverage-linked milestone fees in CODIs Transaction Letter?

The Transaction Letter requires CODI to pay milestone fees to the administrative agent, for the benefit of the lenders, if its consolidated total leverage ratio is not less than 4.50:1.00 at the quarter-ends on June 30, 2026, September 30, 2026, December 31, 2026, and March 31, 2027. The corresponding fees are $5,000,000, $6,500,000, $8,000,000, and $9,500,000, respectively, subject to conditions.

How is Lugano Holding, Inc. involved in CODIs amended credit terms?

Lugano Holding, Inc., a CODI subsidiary, was the subject of a recently completed investigation and filed for Chapter 11 protection in the U.S. Bankruptcy Court for the District of Delaware on November 17, 2025. The Fifth Amendment and Transaction Letter address events of default relating to Lugano, require a dedicated Lugano DIP Budget, and stipulate that modifications to that budget and certain related documents, including CODIs debtor-in-possession loan to Lugano, need prior written consent from the administrative agent or the administrative agent and consenting lenders.