Zale further details $665 million facility led by Bank of America

By Jennifer Chiou

New York, July 27 - Zale Corp. revealed further specifics on its new $665 million five-year credit facility that includes a $650 million revolver and a $15 million first-in last-out loan in an 8-K filing with the Securities and Exchange Commission.

In addition, the company amended and extended its $80 million senior secured term loan with Golden Gate Capital so that it matures on July 24, 2017 instead of in 2015.

As reported, Bank of America Merrill Lynch is the administrative agent on the July 24 deal, and pricing on the revolver can range from Libor plus 175 basis points to 225 bps based on average availability.

There is an unused fee of 37.5 basis points per year.

The first-on last-out loan has pricing that can range from Libor plus 350 bps to 400 bps based on average availability.

Pricing on the extended loan is 11% per annum, down from 15% per annum.

The extended loan is non-callable in year one, then at 104 in year two, 103 in year three and 102 in year four.

Under the amended agreement, the term loan may be prepaid with a make-whole call premium during the first year and a fixed call premium thereafter, declining from 4% in the second year to 0% in the fifth year.

Zale and its subsidiaries must maintain a minimum fixed-charge coverage ratio of 1.00 to 1.00 when excess availability under the new bank facility falls below certain levels, the filing said.

As of July 24, Zale said it exceeded the minimum excess availability threshold and, as of the end of the most recent quarter, the fixed-charge coverage ratio was 1.15.

As noted, proceeds were used to repay $60.5 million of the $140.5 million of outstanding senior secured term loan debt and refinance an existing revolver that was priced 175 bps higher than the new facility.

Zale is an Irving, Texas-based specialty retailer of diamonds and other jewelry products.

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