Kellwood Co. reined in better terms on its new five-year, $400 million asset-based revolver, which includes a $100 million sub-limit for letters of credit. The St. Louis, Mo.-based marketer of apparel and recreational camping products now has just one financial covenant that kicks in when the company's availability falls below $40 million-- otherwise it is covenant-free. The drop in covenants from the previous facility was one draw of doing the new financing, John Bruenger, assistant treasurer, said. There was previously an interest rate coverage covenant, a leverage covenant and a net-worth covenant.
If the company does fall below $40 million, a monthly-fixed charge will be triggered and the charge will stay in place until availability is greater than or equal to $45 million for at least 90 days, according to a filing with the Securities and Exchange Commission.
Bruenger said pricing is competitive and comparable to the last facility, but the main attraction was the greater flexibility the new deal offered. Pricing on this deal is in the range of LIBOR plus 1%-2% based on the amount of excess liquidity to borrowers. Excess liquidity is based on the amount of availability and eligible cash and cash equivalents pledged under the facility, according to the filing.
Kellwood intends to use the financing for working capital and to fund acquisitions. Bruenger would not comment on any specific targets, but the company has a history of a takeovers and its last acquisitions were in 2000 when it acquired Biflex International, Romance du Jour, Dorby Frocks and Group B Clothing Co. It acquired Koret and Fritzi California in 1999 and in 1995 acquired Halmode Apparel and David Dart.
Bank of America and JPMorgan lead the financing. B of A led the company's 2004 facility and JPMorgan has been a part of past deals. "They were two leaders in the ABL space and we felt a joint-lead arranger would give us more weight going to the market," Bruenger said. He said the company and the banks have an ongoing dialogue, sharing feedback, so he does not remember whose idea it was to initiate the new financing.