Tory Burch LLC is reportedly preparing to close the General Atlantic chapter. According to Bloomberg, the New York-based brand has launched a $700 million refinancing operation (approximately €594 million at the current exchange rate) via a leveraged loan (bank financing granted to a company that already has a high level of debt or a less-than-excellent credit rating). A portion of this sum—$346 million—will be used to buy back the stake held by the American private equity firm. The exact size of this stake has never been made public.
A buyout marking the end of a decade of collaboration
General Atlantic acquired a stake in Tory Burch in 2012, at a favorable time for the industry. As the media outlet notes, the acquisition of this stake was made from Chris Burch, the designer’s ex-husband, as part of an out-of-court settlement ending a year-long legal battle. The current transaction, led by Bank of America and with a deadline for creditor commitments set for April 17, also includes the establishment of a new $300 million five-year revolving credit facility, as well as the simultaneous refinancing of existing lines of credit.
Mixed financial outlook
On the creditworthiness front, S&P Global Ratings noted that the transaction results in a $127 million increase in debt, while acknowledging the group’s prudent management of its leverage and solid track record in using debt for capital operations. Moody’s Ratings’ analysis is more critical: the agency has downgraded Tory Burch’s outlook to negative, citing specifically the rise in debt and the decline in available liquidity. The agency forecasts low, single-digit growth in revenue and EBITDA for the next 12 to 18 months.
For the time being, according to information reported by the news agency, both parties have chosen not to comment on these reports.