HanesBrands negotiates new terms on a line of credit
Reposted from Winston-Salem Journal | By Fran Daniel
HanesBrands said Tuesday that it had negotiated new terms for its revolving loan facility that will help it reduce borrowing costs.
The change reduces the company's revolving borrowing rate by 100 basis points, reduces its unused revolver fee by 15 basis points and extends the revolver's maturity date to September 2016.
The maturity date could be extended to July 2017.
Companies create a revolving credit facility for the flexibility to tap into credit when they need it; the balance due may fluctuate throughout the year.
HanesBrands expects the new terms to save it $2 million a year in revolver interest expense. Overall interest expense is expected to be $15 million lower this year than in 2011, primarily because of reduced long-term debt.
"Our banks have recognized our strengthened credit profile as a result of our operating performance and continued improvement of our balance sheet as we use free cash flow to deleverage and reduce debt," said Richard D. Moss, HanesBrands' chief financial officer. "We took advantage of our performance and improvement to reduce our borrowing costs."
Michael Lord, an associate professor of strategy and entrepreneurship at Wake Forest University, said that HanesBrands made a good move in negotiating new terms that will save it money.
"It'll help the company keep its cost of capital under control," he said. "It gives them more flexibility. It's also a clear signal by the banks that HanesBrands has earned a better credit rating. In general, that's a positive signal about the company's business overall."HanesBrands said it plans to use cash in 2012 and 2013 to significantly reduce long-term debt and leverage.
The company previously said that on July 12, it redeemed $150 million of its floating-rate senior notes that were due in 2014. It expects to redeem the remaining $147 million of the notes by the end of this year.
In 2013, the company intends to pay off its $500 million of 8 percent notes, which would reduce total bond debt to about $1 billion.