Mothers Work might refinance senior notes with lower cost debt

By Jennifer Lanning Drey

Portland, Ore., Jan. 24 - Mothers Work, Inc. is exploring ways to refinance the outstanding $90 million of its 11¼% senior notes with lower cost debt, Edward Krell, Mothers Work chief financial officer, said Wednesday during the company's first-quarter 2007 earnings conference call.

"At this point, we can't give a lot of details but what we can say is that we believe given our performance and given the debt financing markets out there, we can get refinancing done at lower rates than what we're currently paying," Krell said.

During the question-and-answer session of the call, Krell told investors that Mothers Work does not expect its debt levels to be altered due to the refinancing.

"Right now, I wouldn't intend on materially reducing or increasing our debt levels through a refinancing, but rather refinancing the existing debt that we have," he said.

At Dec. 31, the company had net debt of $77.3 million - about 25% less than the $103.4 million reported at Dec. 31, 2005.

If successful, the note refinancing would likely result in a one-time charge to earnings but also lead to decreased interest expense on an ongoing basis.

During 2006, Mothers Work repurchased $35 million of the original $125 million principal amount of the senior notes.

The company ended 2006 with no direct borrowings outstanding under its credit facility and about $51 million available under the facility.

Based on its current targets and plans, Mothers Work expects to generate significant positive free cash flow in 2007, Krell said.

The company had cash and cash equivalents of $16.1 million at Dec. 31.

Mothers Work is a Philadelphia-based designer and retailer of maternity clothes.

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