Petco is on firmer ground, according to its officials, who credit the January IPO with allowing the retailer to pay down debt, reposition itself and enjoy the benefits of recent strong performance.
Petco successfully completed the refinancing of its existing term loan facility with borrowings under a new term loan facility and entered into a new asset-based revolving credit facility replacing its existing asset-based revolving credit facility, the company reported in a press release.
“Today’s announcement is another vote of confidence in Petco and underscores our transformation into a company with strong forward momentum actively shaping its future,” said Mike Nuzzo, chief financial and operating officer of Petco. “Our successful IPO in January enabled us to pay down significant debt and with the announcement of this oversubscribed refinancing, and our continued strong performance through the fourth quarter of 2020, we have positively repositioned Petco while enhancing our financial flexibility.”
For those who possess a solid understanding of investment language, or who are working on it, the press release also said:
The new First Lien Term Loan Facility has a principal balance of $1,700 million maturing in 2028. Loans under the new term loan facility bear interest at a rate equal to an applicable margin plus, at our option, either a base rate or LIBOR rate. The applicable margin is 2.25% for base rate borrowings and 3.25% for LIBOR rate borrowings. The proceeds of the new term loan facility were used to repay the company's existing $1,678 million term loan facility maturing in 2022 and, together with available cash on hand, pay fees and expenses related to the refinancing transactions.
The company also successfully obtained commitments for a $500 million asset based revolving credit facility maturing in 2026. The new revolving credit facility replaced the company's existing $500 million revolving credit facility maturing in 2023. Loans under the new revolving credit facility bear interest at a rate equal to an applicable margin plus, at our option, either a base rate or a LIBOR rate. The applicable margin is between 0.25% and 0.75% for base rate loans and between 1.25% and 1.75% for LIBOR loans.
By taking advantage of low borrowing costs and actively managing its near- and medium-term maturity profile, Petco has enhanced its ability to invest for growth. This step is consistent with Petco's strategy to improve its leverage position while proactively investing in key levers to drive growth, including digital and e-commerce integration and expansion, data analytical capabilities, veterinary services, marketing and advertising, and owned brands.
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