Business Context and Reporting Period
Genesco Inc. (NYSE: GCO) filed a Form 8-K on November 21, 2019, reporting events that occurred on November 15, 2019. The filing concerns a material definitive agreement entered into by Schuh Limited, a subsidiary of Genesco Inc., and other related entities.
Key Financial Metrics and Debt Structure
The filing details a new credit facility structure secured by the assets of Schuh Limited and Schuh (ROI) Limited, with Genesco Inc. providing an unsecured guarantee. The agreement includes the following facilities:
- Facility B: £6.25 million term loan at LIBOR plus 2.5% per annum, with quarterly payments through January 2020.
- Facility C: £19.0 million revolving credit agreement. The outstanding balance is £7.0 million, bearing interest at LIBOR plus 2.2% per annum, expiring in January 2020.
- Working Capital Facility: £2.5 million.
- Facility D: €7.2 million revolving credit facility for Irish operations at EURIBOR plus 2.2% per annum, expiring in January 2020.
The agreement imposes financial covenants at the Schuh Limited level, including a minimum interest coverage ratio of 4.50x and a maximum leverage ratio of 1.75x.
Material Changes
This agreement amends and restates a prior agreement dated April 26, 2017. Key structural changes include:
- Replacement of Schuh Group Limited with Schuh Limited as the Parent entity.
- Release of Genesco Schuh GmbH, Schuh Group Limited, and Schuh (Holdings) Limited as Borrowers.
- Establishment of new interest rates and maturity dates (January 2020) for the specified facilities.
Outlook, Risks, and Contingencies
The filing does not provide forward-looking guidance, management commentary on future performance, or specific risk factors beyond the standard terms of the credit agreement. However, it notes that following customary events of default, payment of the facilities may be accelerated or commitments terminated. The filing text does not provide clear values for revenue, profit, cash flow, or overall corporate liquidity metrics.
Investor Verification Checklist
- Verify the total outstanding debt load of Schuh Limited against the new leverage covenant limit of 1.75x.
- Confirm the current interest coverage ratio of Schuh Limited to ensure compliance with the 4.50x minimum requirement.
- Review the full text of Exhibit 10.1 (Amendment and Restatement Agreement) for specific definitions of "customary events of default."
- Assess the impact of the January 2020 maturity dates on the subsidiary's short-term liquidity needs.