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Michaels aims for 3x leverage after debt refinancing, paydown in Q3
By Devika Patel
Knoxville, Tenn., Dec. 3 – Michaels Cos., Inc. plans to keep paying down debt with the goal of reducing its gross leverage ratio to below 3x.
The company improved its capital structure during the last quarter, with the refinancing of its term loan, extending maturity dates to 2027 and $150 million in debt pay down.
“In September of this year, we successfully refinanced our term loan, extending maturities to 2027,” executive vice president and chief financial officer Michael Diamond said on the company’s third quarter ended Oct. 31 earnings conference call on Thursday.
“As part of that refinancing and as a demonstration of our commitment to de-lever our business over the long-term, we paid down $150 million in debt.
“Longer term, we will continue to pay down debt, with the goal of reducing our gross debt to adjusted EBITDA leverage to well below 3x,” Diamond said.
The company will keep deleveraging.
“In the third quarter, we took an important first step in improving our capital structure and paid down $150 million of debt as part of our refinancing,” chief executive officer Ashley Buchanan said on the call.
The company generated $380 million in free cash flow in the quarter.
Cash and cash equivalents were $851,996,000 as of Oct. 31, 2020, compared to $118,387,000 as of Nov. 12, 2019.
Long-term debt was $2,483,702,000 as of Oct. 31, 2020, compared to $2,649,756,000 as of Nov. 12, 2019.
On Sept. 17, Michaels priced a downsized offering of 4¾% seven-year senior secured notes (Ba3/B+) in a drive-by.
The issue size was downsized from $500 million.
Price talk was set in the 4 7/8% area, tighter than initial guidance in the 5¼% to 5½% area.
J.P. Morgan Securities LLC led the offering.
The notes come with three years of call protection.
The Irving, Tex.-based retailer of arts and crafts supplies earmarked the proceeds, together with proceeds from a proposed term loan and cash on hand, to refinance its existing term loan.
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