The world's largest shirt and neckwear company,
, recently announced that it has completed the offering of $700
million senior unsecured notes. The debt offering has been
completed on the scheduled date i.e. December 20, 2012.
The unsecured senior notes carry an annual interest rate of
4.5% and are scheduled to mature on December 15, 2012. A
consortium of Barclays, Citigroup, BofA Merrill Lynch, Credit
Suisse and RBC Capital Markets were the underwriters of this
The company intends to use the proceeds from the offering
along with cash on hand to pay a portion of the cash
consideration related to the acquisition of
The Warnaco Group, Inc.
). In October this year, PVH entered into an agreement with
Warnaco Group to acquire the latter for a consideration of
approximately $2.9 billion.
The acquisition is expected to close by August 20, 2013.
However, if PVH fails, the company has to redeem the full
principal amount along with accrued interest if any on the senior
notes, within a period of 10 days.
As of October 28, 2012, the company has a cash and cash
equivalents of $276.6 million, long-term debt of $1.648 billion
and shareholders' equity of $3.047 billion. The current
debt-to-capitalization ratio comes to 35.1%. However, after the
completion of this debt offering, it now approximates to
Moreover, for the third quarter ended October 28, 2012, the
company paid interest expense of $28.3 million. The new debt
offering will increase the company's quarterly interest expenses
by approximately $7.9 million.
We believe that the debt-to-capitalization ratio, following
the debt offering, will gradually decline in the long run owing
to the company's consistent track-record of generating cash
flows, which may be utilized to bring down debt.
PVH Corp., which competes with
Ralph Lauren Corporation
), currently has a Zacks #2 Rank, which translates into a
short-term Buy rating. However, given the sluggish domestic
economic growth coupled with the crisis in Europe and slowdown in
China, we remain slightly cautious on the stock and uphold our
long-term 'Neutral' recommendation.
PVH Corp., formerly known as Phillips-Van Heusen Corporation,
is headquartered in New York. PVH Corp. designs and markets
branded dress shirts, neckwear, sportswear, footwear and other
related products. The company markets its products at a wholesale
level through department store chains and directly to consumers
through retail stores. The company's portfolio of brands includes
its owned brands and its licensed brands.
PVH CORP (PVH): Free Stock Analysis Report
RALPH LAUREN CP (RL): Free Stock Analysis
WARNACO GRP INC (WRC): Free Stock Analysis
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