Levi Strauss & Co. will redeem $525 million in notes due in 2020 and use the proceeds for a new debt offering of up to $475 million due five years later.
The new offering, which has yet to be priced, will be of senior unsecured notes, ranking equally with the company’s other senior unsecured debt.
Levi’s offer to redeem the $525 million in 7 5/8 percent notes will expire at 5 p.m. Eastern time on April 24 unless extended or terminated. Holders have been offered $1,042.50 for each $1,000 of principal amount held. BofA Merrill Lynch well serve as dealer manager of the cash tender offer.
Levi’s said net proceeds from the offering of the new notes, due in 2025 and also ranking as senior unsecured instruments, will be used in combination with cash on hand and borrowings under its amended senior secured revolving facility for general corporate purposes, which could include repayment of other indebtedness, and to pay fees and expenses related to the redemption.
After Levi’s released first-quarter results last week, Moody’s Investors Service raised its corporate credit rating one notch to “Ba1,” the highest non-investment grade ranking, based, among other factors, on its $500 million reduction in its funded debt load in the past two fiscal years.
Fitch Ratings assigned the new senior unsecured notes, due in 2025, a rating of “BB-minus” and termed the rating outlook as “positive” based on debt reduction efforts and its expectation that Levi’s recent global productivity initiative would begin to flow through to the bottom line,” particularly in fiscal 2016.”
The”BB” group is the top level of non-investment grade debt in Fitch’s rating system.
Levi’s expects annualized savings of between $175 million and $200 million once the restructuring effort is complete. Long-term debt, $1.67 billion at the end of 2012, dropped to $1.09 billion by the end of the 2014 fiscal year.