Michael Kors gets commitments for $1 billion loan, reduces bridge loan

By Angela McDaniels

Tacoma, Wash., Aug. 23 – Michael Kors Holdings Ltd. reduced the commitments under its 364-day bridge loan to £344,189,745.19 from £1,115,000,000 after it entered into an agreement for a $1 billion term loan and amended and restated its revolving credit facility, according to an 8-K filing with the Securities and Exchange Commission.

The commitments under the term loan will be available until the earlier of Jan. 31, 2018 and 120 days after the completion of the acquisition of Jimmy Choo plc. Proceeds will be used to fund a portion of the acquisition.

The company currently plans to further reduce or refinance the commitments under the bridge loan with debt securities prior to the effective date of the acquisition.

The new term loan is divided into a $600 million three-year A-1 tranche and a $400 million five-year A-2 tranche.

Borrowings will be repayable in equal quarterly instalments in an annual amount equal to 10% of the original amount.

The interest rate on the term loan is Libor plus a spread ranging from 100 basis points to 200 bps based on Michael Kors' credit ratings.

The term loan has a commitment fee equal to 10 bps to 25 bps, based on the company’s public debt ratings, applied to the undrawn amount of the term loan from Sept. 23, 2017 until the loan is fully drawn or the commitments terminate or expire.

An agency fee, an arrangement fee and an upfront fee are also payable under the terms of the term loan.

The company must maintain a leverage ratio of no greater than 3.5 to 1 at the end of each quarter. The leverage ratio is calculated as the ratio of the sum of total debt as of the date of the measurement plus 6 times the consolidated rent expense for the last four consecutive fiscal quarters to consolidated EBITDAR for the last four consecutive fiscal quarters.

The term loan is guaranteed by the same members of the Michael Kors group that provide guarantees for the bridge loan. The company and the guarantors will have to provide liens on their assets to secure the term loan if Michael Kors does not maintain investment-grade credit ratings from at least two of S&P, Moody's Investors Service and Fitch Ratings.

Michael Kors has entered into a forward contract with JPMorgan Chase Bank, NA for the delivery of pounds sterling in the amount of $1.45 billion. The forward contract will enable the company to convert its dollar borrowings under the term loan and the proceeds of debt securities issued prior to the effective date of the acquisition into the sterling funds required to fund the cash consideration payable to scheme shareholders under the terms of the acquisition.

Revolver restated

The term loan is provided as a separate tranche under Michael Kors' existing revolving credit facility with JPMorgan, Goldman Sachs Bank USA, Citibank, NA and ING (Ireland) DAC as joint bookrunners and JPMorgan as administrative agent.

JPMorgan, Goldman Sachs, Citibank, ING (Ireland), Bank of America Merrill Lynch, MUFG and U.S. Bank NA are the joint lead arrangers.

Goldman Sachs and Citibank are co-syndication agents. Bank of America, NA, ING (Ireland), MUFG and U.S. Bank are the co-documentation agents. HSBC Bank USA, NA is the senior managing agent.

On Tuesday, Michael Kors amended and restated the revolver.

Following the amendment and restatement, the revolver is $1 billion in size and expires Aug. 22, 2022.

Revolver borrowings may be denominated in dollars and other currencies, including euros, Canadian dollars, pounds sterling, Japanese yen and Swiss francs.

The revolver also includes subfacilities for up to $75 million of letters of credit and up to $50 million of swingline loans.

The interest rate is Libor plus 100 bps to 200 bps based on Michael Kors' credit ratings.

The company has the ability to expand its borrowing availability under the credit agreement in the form of revolving commitments or term loans by up to an additional $500 million.

The revolver has a commitment fee equal to 10 bps to 25 bps, based on the company’s public debt ratings.

As previously reported, Jimmy Choo shareholders will receive 230p per share, for an enterprise value of about $1.35 billion.

The transaction is expected to close in the fourth quarter of calendar 2017.

Michael Kors and Jimmy Choo are luxury lifestyle brands based in London.

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