Levi Strauss & Co. is considering entering an interest-rate swap on the back of a pending bond offering as part of a refinancing plan, according to Eileen VanEss, assistant treasurer in San Francisco. "We're taking a look at an interest-rate swap as part of updating our five-year financing plan. No decisions have been made yet. But it is an option that appears at this time to be very feasible," VanEss added. The company is currently debating what combination of bank debt and bonds it will use to refinance a USD1 billion bank facility due August 2003 and a USD350 million, 6.8% senior bond issue due in November 2003.
If the company chooses to refinance the bond with a new offering, it's likely it would look to enter an interest-rate swap on the back of the issue, said VanEss. It would opt for the bond deal if it determined that it is more important to raise working capital because of a need for permanent long-term financing. In the swap, the company would received a fixed rate and look to pay a floating rate that was no higher than 250 basis points over three-month LIBOR, according to an analyst who follows the company. "If it can't get that rate, it will probably bail out on the swap proposal," he said. If it decides it wants to pay down more debt it will focus on securing bank loans because they are flexible and have a shorter duration, VanEss said.
Levi's relationship firms are Bank of America, Citicorp, and the Bank of Nova Scotia. Officials at those firms declined comment. The bank group led the original USD1 billion credit facility and also underwrote the USD350 million bond deal. VanEss said the firms would likely lead any other deals, but she declined comment on the possibility of using one of the firms as a counterparty in a swap.
