Bank of America Agents Zale’s New $665MM Credit Facility
Zale Corporation secured a new $665 million credit facility, which includes an amended and extended $650 million revolving credit facility and a new $15 million First-In, Last-Out (FILO) credit facility. The company also announced that it utilized increased availability from these facilities to fund a prepayment of $60.5 million on its senior secured term loan. In addition, Zale amended and extended its senior secured term loan with Golden Gate Capital for the remaining $80 million.
The new $665 million credit facility was led by Bank of America, administrative agent, and Wells Fargo Bank and J.P. Morgan Securities, co-syndication agents. Peter J. Solomon Company acted as financial advisor for the company.
At current interest rates, these transactions reduce the company’s overall average borrowing cost from about eight percent to about four percent, resulting in projected annual pretax savings in the fiscal year commencing August 1, 2012 of approximately $17 million. As a result of the financing transactions, overall available liquidity has improved and is expected to stand at approximately $140 million on July 31, 2012. Zale incurred costs of approximately $13 million related to the financing transactions, of which approximately $5 million will be expensed in the fourth fiscal quarter of 2012, with the remaining costs to be amortized over the five year life of the agreements.
“The benefits gained from the debt refinancing are a result of the significant operating improvements that the company has achieved over the past two years,” commented Theo Killion, chief executive officer. “Going forward, our aggregate borrowing cost will be substantially lower, which will accelerate the company’s return to profitability.”