Business Context and Reporting Period
Company: Coach, Inc. (Note: Metadata references TAPESTRY, INC., but the filing text identifies the registrant as Coach, Inc.)
Filing Type: Form 8-K (Current Report)
Date: June 18, 2012
Event: Entry into a Material Definitive Agreement and termination of a prior credit facility.
Key Financial Metrics and Facility Terms
This filing details the terms of a new revolving credit facility rather than reporting operational financial results (revenue, profit, cash flow). Key facility metrics include:
- Facility Size: Initial aggregate amount of up to $400 million.
- Expansion Option: Commitments may be increased by up to $250 million, or term loans incurred up to $250 million.
- Maturity: June 2017 (5-year term).
- Letters of Credit: Standby letters of credit limited to $125 million; commercial letters of credit available up to the full facility amount.
- Swing Line Loans: Up to $20 million.
- Currencies: U.S. Dollars, Euros, Pounds Sterling, and Japanese Yen.
- Interest Basis: Alternate Base Rate or Adjusted LIBO Rate plus an applicable margin based on a Pricing Grid.
Material Changes Versus Prior Period
Replacement of Existing Facility: The new agreement replaces the Revolving Credit Agreement dated July 26, 2007, with Bank of America, N.A. as the administrative agent.
Administrative Agent Change: JPMorgan Chase Bank, N.A. is now the administrative agent.
Termination: The Existing Credit Facility was terminated on June 18, 2012, in connection with the new agreement.
Guidance, Covenants, and Risks
Financial Covenants: The Company must comply with a maximum Leverage Ratio of 4.0 to 1.0 on a quarterly basis. The ratio is defined as consolidated debt plus 800% of consolidated lease expense divided by consolidated EBITDAR.
Restrictive Covenants: The agreement limits the ability to incur additional debt, engage in new lines of business, incur liens, merge, consolidate, liquidate, dispose of substantially all assets, make investments, or make restricted payments during an event of default.
Events of Default: Includes nonpayment, material inaccuracy of representations, covenant violations, cross-defaults, bankruptcy, and change of control. Default may lead to termination of commitments and acceleration of debt maturity.
Guarantees: The facility is guaranteed by direct and indirect domestic subsidiaries defined as "Significant Subsidiaries."
Important Facts for Investor Verification
- Verify the Company's current Leverage Ratio to ensure compliance with the 4.0 to 1.0 covenant.
- Confirm the utilization of the $400 million facility and any usage of the $250 million accordion feature.
- Review the specific Pricing Grid to understand how interest margins fluctuate based on leverage.
- Monitor for any "Significant Subsidiary" changes that could affect the guarantee structure.
- Check subsequent filings (Form 10-K) for the full text of the Credit Agreement referenced in this 8-K.