Signet aims for 3x ratio, may use ABL loan for 2024 notes, preferreds

By Devika Patel

Knoxville, Tenn., Sept. 3 – Signet Jewelers Ltd. management hopes to get the company’s leverage ratio below 3x and may address its 2024 senior notes and preferred stock with funds from its recently extended ABL facility.

“We made significant progress in strengthening our financial health this quarter,” chief financial and strategy officer Joan M. Hilson said on the company’s second quarter ended July 31 earnings conference call on Thursday.

“We have financial flexibility to continue investing in our long-term growth recently enhanced by the extension of our ABL facility.

“We’re in a net cash position, including both our long-term debt and preferred share obligations, positioning us well to deliver on our capital priorities,” she said.

The company is prioritizing debt reduction, with the aim of getting its adjusted debt to EBITDA leverage ratio below 3x.

The company plans to use its ABL facilities to take care of its 2024 senior notes and preferred shares.

“Our first priority is to invest in the business,” Hilson said.

“Our second priority is to focus on our debt, with the goal of reducing our adjusted debt to EBITDA leverage ratio to below 3x.

“I’d note that the recent extension of our ABL facilities through July 2026 provides us an additional option to address our 2024 senior notes and preferred share obligations,” she said.

On July 28, Signet entered into a second amendment to its senior secured asset-based credit facility dated Sept. 27, 2019 for a senior secured asset-based credit facility of up to the lesser of $1.5 billion and a borrowing base based on the value of inventory and third-party credit card receivables.

The amendment allows Signet to increase the size of the ABL facility, including in the form of first-in last-out term loans, by up to $600 million.

Signet also amended its ABL revolver to extend the maturity date to July 28, 2026 from Sept. 27, 2024.

In addition, the amendment provides for a Sonia-based interest rate for sterling-denominated borrowings and includes provisions for determining an alternative rate of interest after the expected phase out of Libor.

The amendment also removes, in some cases, the requirement for monthly financial reporting.

The company does not currently have any outstanding borrowings under the ABL facility.

Signet Group Ltd. is the lead administrative borrower, a lead borrower and a borrower; Signet Group Treasury Services Inc., Sterling Jewelers Inc., Signet Trading Ltd. and Zale Canada Co. are each a lead borrower and a borrower; and Sterling Inc., Zale Delaware, Inc., R2Net Inc. and R2Net Manufacturing Inc. are also borrowers.

Bank of America, NA is administrative agent, collateral agent and security trustee.

Signet Jewelers is a Hamilton, Bermuda-domiciled and Akron, Ohio-based retailer of diamond jewelry.

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