Business Context and Reporting Period
Company: Capri Holdings Ltd
Filing Type: Form 8-K (Current Report)
Date of Report: February 4, 2025
Event: Entry into a Material Definitive Agreement (Amended and Restated Credit Agreement) and Termination of a prior Term Facility Agreement.
Key Financial Metrics and Debt Structure
This filing details a refinancing transaction rather than operating performance metrics. Revenue, profit, and cash flow figures are not provided in this document.
- Total Credit Facilities: $2.2 billion aggregate principal amount.
- New Term Loans: $700 million senior secured term loan facility.
- USD Tranche: $392 million (fully drawn).
- Euro Tranche: Euro equivalent of $302 million (fully drawn).
- Revolving Credit Facility: $1.5 billion (existing facility retained).
- Sub-facilities: Up to $125 million for letters of credit; up to $100 million for swing line loans.
- Maturity Date: July 1, 2027 for both Revolving Credit Facility and New Term Loans.
- Collateral: Liens on substantially all assets of the Company and U.S. subsidiaries (excluding real property) and substantially all registered intellectual property.
Material Changes Versus Prior Period
- Refinancing: The Company replaced its existing credit agreement (dated July 1, 2022) with the new 2025 Credit Facilities.
- Debt Repayment:
- Repaid $450 million senior unsecured delayed draw term loans (Existing Term Loans) due November 1, 2025.
- Repaid and terminated a EUR 450 million senior unsecured term loan under a separate Term Facility Agreement dated December 5, 2022.
- Security Status: The new Term Loans are senior secured, whereas the repaid Existing Term Loans were senior unsecured.
- Amortization: New Term Loans require quarterly principal payments of 1.25% of the original principal amount, commencing after the first full calendar quarter post-closing.
Guidance, Covenants, and Risks
Covenants:
- Net Leverage Ratio: Must not exceed 4.0 to 1.0.
- Acquisition Exception: May be increased to 4.5 to 1.0 for four fiscal quarters following a material acquisition (limited to two occasions).
- Incremental Facilities: Permitted up to $750 million or an amount maintaining a secured debt-to-EBITDAR ratio of 3.00 to 1.00.
- Asset Sales: Net cash proceeds from non-ordinary course asset sales must be used to prepay New Term Loans if not reinvested in the business.
Interest Rates:
- Revolving Facility: Variable rates based on Alternate Base Rate, Term SOFR, SONIA, SARON, EURIBOR, CORRA, or TIBOR plus an applicable margin based on credit ratings/leverage.
- Term Loans: USD loans based on Alternate Base Rate or Adjusted Term SOFR; Euro loans based on Adjusted EURIBOR.
Risks and Contingencies:
- Events of Default: Include payment defaults, covenant breaches, cross-defaults, bankruptcy, and change of control. Remedies include acceleration of debt and exercise of remedies against collateral.
- Prepayment: Permitted without premium or penalty (except customary breakage costs).
Investor Verification Checklist
- Verify the exact amount of the Euro Term Loans converted to USD at the closing date exchange rate.
- Confirm the current Net Leverage Ratio to ensure compliance with the 4.0 to 1.0 covenant.
- Review the specific "applicable margin" for interest rates based on the Company's current public debt ratings.
- Assess the impact of the new quarterly amortization schedule (1.25% of principal) on future cash flow requirements.
- Examine the definition of "Consolidated EBITDAR" in the full agreement to understand adjustments to net income.