L Brands’ Bath & Body Works unit intends to cut leverage to mid-2x

By Devika Patel

Knoxville, Tenn., July 19 – L Brands, Inc. plans to separate its Victoria’s Secret business via a tax-free spinoff slated for August 2021.

After the spinoff, the remaining Bath & Body Works business will target a lower adjusted debt to EBITDA leverage ratio of 2.5x and plans to pay down about $500 million of debt in its bid to decrease leverage.

“In May, we announced our plans to separate Bath & Body Works and Victoria’s Secret into two, independent publicly traded companies,” L Brands and Bath & Body Works chief executive officer Andrew Meslow said on the Bath & Body Works investor conference call on Monday.

Bath & Body Works management expects to pay down about $500 million of debt as part of its plan to cut leverage down to the mid-2x range.

“As we have proceeded with the spin, we’ve worked with advisors and our board of directors to develop a disciplined financial strategy and a view of our go-forward capital structure,” Bath & Body Works chief financial officer Wendy Arlen said on the call.

“Through this work, we’ve identified a target leverage ratio, so right now we are shooting for [an] adjusted debt to EBITDA leverage ratio in the mid-2x range.

“We have also, as part of that, committed to reducing debt by approximately $500 million.

“When we do that, that will put us very close to that mid-2x target range,” she said.

L Brands is a Columbus, Ohio-based company that operates specialty stores featuring custom brands.

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