Liz Claiborne provides for secured asset-based structure

16 Jan '09

4 min read

Liz Claiborne Inc announced that it has successfully completed an amendment and extension of its existing bank revolving credit facility. J.P. Morgan Securities Inc. and Banc of America Securities LLC were Joint Lead Arrangers for this amendment and extension.

The amended terms and conditions provide for a reduction in the facility size to $600 million from $750 million which is appropriate for the Company's projected needs following its recent divestitures, an extension of the maturity date to May 31, 2011, a secured asset-based structure, the elimination of the leverage covenant and asset coverage covenant and an increase in fees and interest rates. The facility may continue to be used for working capital and general corporate purposes and will back both trade and standby letters of credit in addition to the Company's synthetic lease.

The amendment and extension revises the calculation and required coverage levels of the fixed charge financial covenant which will be calculated on a rolling twelve month basis and must exceed 1.25 times the ratio of consolidated EBITDA less capital expenditures divided by fixed charges (all as defined in the agreement) through November 2009, stepping up to a minimum coverage of 1.50 times from December 2009 through the maturity of the facility.

William L. McComb, Chief Executive Officer of Liz Claiborne Inc., said: "We are extremely pleased to announce the successful completion of this amendment and extension of our bank credit facility which extends the maturity date of the facility to May 2011 from October 2009. We know that the financial community has been closely monitoring this transaction in light of very challenging credit market conditions. While we continue to aggressively manage our balance sheet and preserve liquidity, this amendment and extension affords us stability in the face of a most uncertain 2009."

Mr. McComb continued: "During the fourth quarter, we demonstrated exceptional balance sheet and cash flow management as we paid down $175 million in bank debt, primarily driven by aggressive inventory management, resulting in year end bank debt of approximately $234 million. We also ended the year with total debt of approximately $745 million which is below the $750 to $775 million range we guided on our November 13th earnings call."

Mr. McComb concluded: "Needless to say, the operating environment in the fourth quarter was the most challenging we have experienced in decades. Despite a pickup in comp store sales in the last few weeks of the quarter, our comps for Juicy Couture, Lucky Brand and Kate Spade were each in the negative mid-teens while Mexx's comps were negative 12%. The highly promotional retail environment also negatively impacted margins in both our retail and wholesale businesses, causing us to project adjusted EPS from continuing operations in the range of $0.00 to ($0.15) for the quarter compared to our previously guided range of $0.19 to $0.24. We will provide more details on the quarter during our earnings call in early March."

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