Bebe Stores Inc. has refinanced to lower its costs and grow the business.
The San Francisco-based licensor of women’s fashion and accessories entered into a credit agreement providing a five-year senior secured term loan of $25 million with an additional drawdown capacity of up to $10 million from SLR Credit Solutions.
In its announcement Thursday, the company said proceeds of the financing were used to retire its existing secured term loan of $22 million and for additional growth capital purposes.
The company also announced it agreed to purchase eight Buddy’s Home Furnishings rent-to-own franchises from Franchise Group Inc. The eight franchises are located in Kentucky and Indiana. The purchase “complement the company’s existing footprint in the Southeast U.S. and leverages Bebe’s existing back-office infrastructure,” Bebe said in its statement.
In addition, Bebe raised its quarterly cash dividend on its common stock to $0.15 per share from $0.06 per share implemented during the second quarter of 2020. The quarterly dividend is payable Sept. 24, 2021, to shareholders of record as of Sept. 10, 2021.
“This refinancing allows us to meaningfully lower our cost of capital while providing further financial flexibility to execute on our strategy to deliver future growth from our platform,” said Bebe CEO Manny Mashouf. “The increase in our quarterly dividend represents the strong operating results from our brand licensing properties and our positive outlook for the 47 Buddy’s Home Furnishings rent-to-own franchises we acquired in November 2020, in line with our stated goal of providing a strong dividend to our shareholders.”
The announcement indicated that loans under the credit facility will bear interest at LIBOR, the standard benchmark for setting interest rates on adjustable loans, plus 5.50 percent with a reduction to 5.25 percent after one year if the company maintains a leverage ratio (debt to assets) at or less than 1.50:1.00. The credit facility will be secured by substantially all assets of the company and its subsidiaries.
Bebe is a licensor of apparel and accessories that distributes Bebe-branded products through licensees in approximately 100 international stores and online. Bebe also owns and operates through subsidiaries approximately 55 rent-to-own Buddy’s Home Furnishings franchise stores in 10 states in the southeastern U.S. They offer furniture, appliances and electronics to consumers through rent-to-own agreements.
The company, founded in 1976 by Mashouf, was among one of the highest, profile and hottest selling contemporary brands roughly two decades ago, fueled by its sexy styles and ads. However, as trends changed and mall traffic declined, Bebe ran into some turbulent times marked by numerous store closings and executive turnover.