Designer Brands enters into $650 million of new credit facilities

By Sarah Lizee

Olympia, Wash., Aug. 7 – Designer Brands Inc. entered into a $250 million term loan credit agreement with Sixth Street Specialty Lending, Inc. as administrative agent and a $400 million asset-based credit agreement with PNC Bank, NA as administrative agent on Friday, according to an 8-K filing with the Securities and Exchange Commission.

Designer Brands is the U.S. borrower and Designer Brands Canada Inc. is the Canadian borrower under the term loan.

Sixth Street is the lead arranger of the term loan.

The senior secured term loan consists of a $225 borrowing by Designer Brands and a $25 million borrowing by Designer Brands Canada.

Proceeds of the term loan may be used to refinance existing debt and to pay fees and expense incurred in connection with such refinancing and the incurrence of the term loan and the ABL credit facility, to provide working capital to the borrowers and for general corporate purposes.

Borrowings under the term loan credit agreement bear interest at Libor plus 850 basis points, subject to a 1.25% Libor floor.

The term loan credit agreement matures on Aug. 7, 2025.

The term loan credit agreement requires the company to maintain a minimum availability under the ABL credit facility and at any time liquidity is less than $150 million, maintain a minimum EBITDA.

Designer Brands is the U.S. borrower and Designer Brands Canada is the Canadian borrower under the ABL facility.

For the ABL credit agreement, PNC Capital Markets, LLC and Bank of America, NA are the joint bookrunners and joint lead arrangers. Bank of America is the syndication agent. Bank of Montreal and Wells Fargo Bank, NA are the co-documentation agents.

The amount of the ABL facility is subject to a borrowing base formula and may be increased by up to $100 million without the consent of lenders, subject to some conditions.

The ABL credit agreement provides for swingline loans of up to $40 million if drawn under the U.S. borrowing base and up to $2 million if drawn under the Canadian borrowing base, and the issuance of standby or commercial letters of credit of up to $50 million.

Proceeds may be used to refinance existing debt and to pay fees and expenses incurred in connection with any refinancing and the incurrence of the term loan and the ABL credit facility, to provide working capital to the borrowers and for general corporate purposes.

Borrowings bear interest at Libor plus 250 bps, subject to a Libor floor of 0.75%. The margin over Libor will be determined based on availability.

The ABL credit agreement matures on Aug.7, 2025.

The ABL credit agreement requires the company to maintain a minimum availability of the greater of $30 million and 10% of the maximum credit amount.

Also on Friday, the company refinanced the amounts under and terminated its existing credit agreement dated Aug. 25, 2017 with PNC Bank. The credit agreement provided for a $400 million revolver. It would have matured on Aug. 25, 2022.

Designer Brands is a Columbus, Ohio-based designs, produces and retails footwear and accessories.

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