LONDON — Compagnie Financière Richemont, parent of brands including Cartier and Van Cleef & Arpels, is taking advantage of its strong cash position in these difficult times, and borrowing from investors via a euro-denominated bond amounting to 2 billion euros.
Richemont said late Monday that the transaction launched on May 18 with three tranches maturing in 2028, 2032 and 2040. The notes are priced with a coupon of 0.75 percent for the 0.50 billion euro eight-year maturity note; 1.125 percent for the 0.85 billion 12-year note, and 1.625 percent for the 0.65 billion 20-year note.
The notes are expected to receive a rating of A-plus, Richemont said, adding that S&P Global Ratings recently affirmed the A-plus rating of the company as a whole and revised the outlook from “negative” to “stable.”
Richemont said net proceeds of the bond would go toward “general corporate purposes,” and would act as a safety net for potentially tougher times ahead.
Burkhart Grund, chief finance officer of Richemont, said the significant interest from investors for the notes “demonstrated recognition of our strong cash-generation profile and unique business model around [our] maisons, with centuries of heritage as well as digital native businesses.”
“Whilst Richemont has a robust balance sheet and more than adequate cash resources, we view it prudent to secure additional liquidity to weather potentially tougher times ahead. This bond transaction will support the long-term development of our maisons and businesses,” he said.
Richemont said it would make an application for the notes to be listed on the regulated market of the Luxembourg Stock Exchange.
During a call on Friday to discuss the group’s 2019-20 results, chairman Johann Rupert said Richemont has enough liquidity to last 36 months, a net cash position of 2.40 billion euros and increasingly flexible, digitally led business model.
He touted Richemont’s lean and nimble business model and assured the financial markets the company was well-placed for long-term growth.
“We are lucky in that we prepared for an economic downturn. COVID-19 merely sped up what was probably going to happen in any case: Economic reality settling in. We didn’t know what was going to trigger the downturn, and obviously never thought it would be a pandemic of such proportions. A few years ago we acted decisively in cleaning up our watch market, and we’ve always been very careful with our cash and our liquidity,” he said.
He also decided to downsize Richemont’s dividend this year and to give shareholders a “loyalty bonus” by way of options to acquire future shares on advantageous terms. He said Richemont was still ironing out the details, but the aim is for shareholders to be “richly rewarded” once better times return.
During the call, Richemont did not give any indication of how sales have been faring over the past few weeks, or offer any projections for fiscal 2020-21, saying there was “limited visibility” on the next 12 months and “no one can see when when we will see economic activity normalize.”
This is not the first time that Richemont has launched a bond.
At the time, it said the net proceeds from the issue of the notes would be used for the group’s “general corporate purposes and may fund the acquisition of the ordinary shares of Yoox Net-a-porter Group, in whole or in part, pursuant to the YNAP voluntary public tender offer.”
Earlier that year Richemont revealed its intention to buy all the ordinary shares of Yoox Net-a-porter Group SpA at 38 euros a share for a value of up to 2.77 billion euros. Its plan was to acquire 51 percent of the YNAP shares it did not already own, and the deal closed later that year. It now owns 100 percent of YNAP.
The 2018 euro bond transaction launched on March 15 of that year had three tranches maturing in 2026, 2030 and 2038. The notes were priced with a coupon of 1 percent for the 1.5 billion euros, eight-year maturity note; 1.5 percent for the 1.25 billion euros, 12-year note, and 2 percent for the 1 billion-euro 20-year note.