RH completed an incremental $500 million term debt financing.
Consistent with the strategy of the original $2 billion term debt financing in October 2021, the additional $500 million represents an attractive cost of capital and provides optionality that will enable RH to be opportunistic in creating long term value for shareholders.
The $500 million term debt financing was completed by means of a 2022 incremental amendment through RH’s subsidiary, Restoration Hardware (RHI), as the borrower, and Bank of America as administrative agent and lender, amending the term loan credit agreement, dated as of Oct. 20, 2021, by and among RHI as the borrower, the lenders party thereto and the term agent.
The 2022 incremental term debt has a maturity date of Oct. 20, 2028 and bears interest at an annual rate based on the secured overnight financing rate (SOFR) plus a credit spread adjustment of 0.1% plus an interest rate margin of 3.25% subject to a 0.5% SOFR floor.
The company anticipates that the additional interest expense as a result of the 2022 incremental term debt will be approximately $4.5 million on an after-tax basis for each fiscal quarter assuming current interest rate levels. Together with the initial $2 billion term loan pursuant to the existing credit agreement, the interest rate cost on an after-tax basis for the aggregate $2.5 billion of term debt under the amended credit agreement is expected to be approximately $17 million per fiscal quarter based on current interest rates.
The issuance of the 2022 incremental term debt was assigned a Ba3 rating from Moody’s Investors Service and BB rating from S&P Global.
Proceeds of the 2022 incremental term debt are expected to be used for general corporate purposes.
