Kate Spade gets asset-based revolver due 2019 with $200 million cap

By Toni Weeks

San Luis Obispo, Calif., May 22 - Kate Spade & Co. entered into a credit agreement on May 16 that provides for a senior secured asset-based revolving credit facility maturing May 16, 2019, according to an 8-K filing with the Securities and Exchange Commission.

Kate Spade Canada Inc. and Kate Spade UK Ltd. are also borrowers under the agreement, which replaces the company's existing senior secured asset-based revolver.

The new revolver provides availability in an amount equal to the lesser of $200 million and a borrowing base that is computed monthly and comprised of Kate Spade's eligible cash, accounts receivable and inventory.

The revolver also includes a swingline subfacility of $30 million, a multicurrency subfacility of $35 million and an accordion feature to expand the facility by up to $100 million. Up to $125 million is available for the issuance of letters of credit, and standby letters of credit may not exceed $40 million in total.

The agreement provides for a decrease in fees and interest rates compared to the company's previous asset-based revolving loan facility, including spreads of 150 basis points to 200 bps over Libor, depending on the level of aggregate availability.

Under the revolver terms, the company must maintain pro forma compliance with a fixed-charge coverage ratio of 1 to 1 on a trailing four-quarter basis if availability under the agreement for three consecutive business days falls below the greater of $15 million and 10% of the lesser of the aggregate commitments and the borrowing base. It also requires the company to apply substantially all cash collections to reduce outstanding borrowings under the agreement if availability under the revolver for three consecutive business days falls below the greater of $20 million and 12.5% of the lesser of the aggregate commitments and the borrowing base.

Borrowings may be used for working capital and general corporate purposes, including refinancing Kate Spade's previous asset-based revolving credit facility.

The revolving credit agreement is guaranteed by substantially all of the company's current domestic subsidiaries, some of the company's future domestic subsidiaries and some of the company's foreign subsidiaries. It is secured by a first-priority lien on substantially all of the assets of the company and other borrowers and guarantors.

JPMorgan Chase Bank, NA is the administrative agent and U.S. collateral agent. JPMorgan Chase Bank, NA, Toronto Branch is the Canadian administrative agent and Canadian collateral agent. J.P. Morgan Europe Ltd. is the European administrative agent and European collateral agent. Bank of America, NA is the syndication agent. Wells Fargo Bank, NA and SunTrust Bank are the documentation agents.

New York-based Kate Spade is a retailer of women's clothing and accessories.

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