After months of work on its financial underpinning, Saks Inc. successfully negotiated a two-year extension and amendment for its $500 million revolving credit facility, which now expires in November 2013.
“This year we undertook a series of important actions that strengthened our capital structure and will provide considerable flexibility going forward,” said Kevin Wills, executive vice president and chief financial officer. “In addition to the extension and amendment of the revolving credit facility, we issued $120 million of convertible notes in May, and we completed a $100 million common stock offering last month. Proceeds of those transactions were used to reduce borrowings on our revolving credit facility.”
At the end of the third quarter, the luxury retailer had no direct outstanding borrowings under the facility, which is unencumbered by financial covenants unless availability falls to less than $87.5 million. Below that threshold the company is subject to a fixed charge coverage ratio. Interest rates on the facility range from 3.5 percent to 4 percent over the London Interbank Offered Rate.
Wells Fargo Retail Finance, UBS Securities, Regions Business Capital and GE Capital Markets Inc. arranged the facility, which was previously set to expire in September 2011.
Speaking via video from New York to a luxury conference in Milan, Stephen I. Sadove, Saks chairman and chief executive officer, described Diego Della Valle’s holding in the department store group as “a passive investment” and ruled out his direct involvement in the running of Saks.
Della Valle echoed that view from Milan, saying, “Our intention is not to manage but to watch.”
Through his investment vehicle Diego Della Valle & C.S.A.P.A., Della Valle holds a 5.9 percent stake in Saks after doubling his holdings in the retailer earlier in the year.
Shares of Saks fell 9 cents, or 1.4 percent, to $6.41 Tuesday.