Spectrum Brands plans to use ‘high’ liquidity to refi, pay down debt

By Devika Patel

Knoxville, Tenn., July 26 – Spectrum Brands Holdings, Inc. management intends to keep the company’s liquidity “extremely high” and use that liquidity, which is expected to be $3 billion at year-end following some asset sales, to pay down or refinance debt.

“We will significantly strengthen our balance sheet from our fiscal 2018 free cash flow and from the proceeds from the asset sales in the second half of this year,” executive chairman and chief executive officer David M. Maura said on the company’s third quarter ended June 30 earnings conference call on Thursday.

“I want to materially de-lever this company and we might go sub-3x levered and we might run it there for a while.

“I want to keep the liquidity position of this company extremely high over the next six months,” Maura said.

The company will use that liquidity – expected to be $3 billion following the end of this year – to refinance and pay down debt.

“Clearly I’m not going to sit on $3 billion of cash with no yield when I’ve got my debt structure out there,”

“We’re going to de-lever.

“I want to get the balance sheet very, very liquid and when my debt holders see that, I think it’s going to allow me to refinance at a very attractive rate.

“I think it’s going to let me call some bonds cheaper than I can get them today.

“We will pay down a lot of debt.

“We will not sit on $3 billion of liquidity,” Maura said.

Spectrum had liquidity of more than $1 billion as of June 30, including a cash balance of $814.6 million and $234 million available under its $800 million cash flow revolver.

“We ended the third quarter with ample liquidity,” executive vice president and chief financial officer Douglas L. Martin said on the call.

The company reported adjusted EBITDA of $206.4 million in the third quarter of 2018, compared to $199.3 million in fiscal 2017.

As of June 30, the company had approximately $5,412,000,000 of debt outstanding.

Spectrum is a Middleton, Wis.-based consumer products company.

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