In a move to take advantage of the current favorable credit
market and enhance its financial flexibility, the teen apparel
Abercrombie & Fitch Company
) recently announced the decision to refinance its existing credit
Currently, the company has $500 million worth of existing credit
facilities which includes an unsecured Revolving Credit Facility of
$350 million maturing on Jul 27, 2016 and a Term loan A of $150
million maturing on Feb 23, 2017.
Abercrombie intends to refinance the above mentioned credit
facilities with a new credit facility of worth $725 million of
which $400 million will be issued under Asset-Based Revolving
Credit Facility and $325 million will be issued under Term Loan B.
The maturity period of both the facilities will be five and seven
At the end of first-quarter fiscal 2015, the company had
borrowings of $131.5 million under the Term loan A and $60 million
under the Revolving Credit Facility. After paying the entire
outstanding amounts, the balance of proceeds from the new credit
agreements will be used for general corporate purposes which
includes share repurchases. For the fiscal year ended Feb 1, 2014,
the average interest rate stood at 1.85% on its existing credit
Borrowing costs are still very low, enabling companies to obtain
easy financing. Corporate bonds and borrowings from banks are in
high demand as the U.S. treasuries are yielding low rates. We
believe that the aforementioned moves by the company will provide
it with financial flexibility to drive long-term growth.
Other Stocks to Consider
Currently, Abercrombie carries a Zacks Rank #3 (Hold). However,
some better-ranked stocks in the shoe/apparel retail industry
Citi Trends, Inc.
The Men's Wearhouse Inc.
Christopher & Banks Corp.
), all carrying a Zacks Rank #1 (Strong Buy).
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