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Hanesbrands amends credit agreement, sets debt-reduction goal
13
Mar '09
Chairman and CEO Richard A. Noll
Chairman and CEO Richard A. Noll
Hanesbrands Inc. announced that it has successfully amended its first-lien credit agreement with debt holders and set a goal to reduce its long-term debt in 2009 by at least $300 million.

“We had a very positive response to our credit amendment, approved by an overwhelming majority of debt holders,”Chairman and Chief Executive Officer Richard A. Noll said. “Resolving this issue puts us in good position to navigate this uncertain economic environment.”

The company announced at its investor-day presentation on Feb. 24, 2009, that it had started the first-lien amendment process as a precaution to ensure that it had adequate debt-covenant cushion in the recessionary environment. The company's successful credit amendment, which delays the most restrictive debt-leverage ratio from fourth quarter 2009 to third quarter 2011, applies to the company's $990 million of Term Loans A and B as well as its revolving credit facility.

“This amendment and our ability to aggressively manage costs give us additional cushion to meet our adjusted debt-to-EBITDA ratios under a wide range of economic conditions,” said Hanesbrands Executive Vice President and Chief Financial Officer E. Lee Wyatt. “Even under the scenarios we laid out at our recent investor-day presentation, we would end 2009 with at least as much debt cushion as we had at the end of 2008.”

The amendment increases the company's interest-rate spread by 300 basis points, and LIBOR will remain a floating rate with no floor. With this new interest-rate structure, Hanesbrands expects net interest expense for 2009 to be approximately $165 million, compared with $155 million in 2008.

Under the amendment, the adjusted debt-to-EBITDA leverage ratio limits increase from 3.75 times to 4.25 times in the first quarter of 2009, from 3.5 times to 4.2 times in the second quarter, from 3.25 times to 3.95 times in the third quarter, and from 3.0 times to 3.6 times in the fourth quarter. After 2009, the new ratio continues to step down from 3.6 times, ending at 3.0 times in the third quarter 2011.

Additionally, the company has set a goal for 2009 to pay down at least $300 million of debt. The goal to accelerate debt reduction this year is supported by a number of factors the company outlined during the investor-day presentation, including cost reductions, product price increases, second-half commodity-cost benefits, reduced capital-expenditure needs and plans to reduce inventory.

“Using cash flow and conservative cost and inventory management, achieving this debt-reduction goal would bring our total long-term debt to less than $1.9 billion, a decrease of more than $700 million since our spinoff in September 2006,” Noll said.

Hanesbrands Inc


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