Retail Ventures, the operator of discount chains DSW Shoe Warehouse, Filene's Basement and Value City Department Stores, plans to refinance its revolving credit agreement in the first half of 2005 and to pay down $100 million in term loans. This will coincide with an initial public offering of its DSW chain that is expected to raise approximately $185 million and will strengthen the balance sheet, improve debt coverage and reduce debt costs.
Last week, the company increased the revolver by $75 million to $425 million. The amended credit is part of the one-time changes the company is undergoing and shows the support of the company's bank group, said Jim McGrady, Retail Venture's cfo. The company estimated a loss for 2004 that includes severance due to workforce reductions, store closing costs, impairment charges and adjustments for lease accounting. Once the IPO, led by Lehman Brothers, CIBC World Markets and Johnson Rice, is completed, the company will implement a new business plan that will improve merchandise presentation.
The revolver was put in place in June 2002 and was initially set to mature in 2005. Last year, however, it was amended to expire in June 2006. Cerberus Partners and Schottenstein Stores Corp., meanwhile, provided the two $50 million term loans. The interest per annum on the term loans during the initial two years is 14% if paid in cash and 15% if Retail Ventures elects for a PIK option. The revolver is priced at the bank base rate or Eurodollar plus 2-2 3/4% depending upon the level of average excess availability.
National City Business Credit, The CIT Group/ Business Credit, Fleet Retail Group, Wells Fargo Retail Finance and General Electric Capital Corp. agent the credit.
HSBC Business Credit, Webster Business Credit, LaSalle Bank, PNC Bank and Siemens Financial Services also participate in the facility and signed the amendment. Retail Venture's banking relationship with Fleet started in 2002. The company's relationship with National City started more than 20 years ago. McGrady said Joe Kwasny has been Retail Venture's relationship banker at National City.