8-KMaterial AgreementsFinancial EventsExhibits & Filings

Burlington Stores, Inc. 8-K Report, Material Agreement (Aug 18, 2014)

Filed August 18, 2014For Securities:BURL

Summary

Burlington Stores, Inc. (BURL) filed an 8-K on August 18, 2014, detailing significant amendments to its credit facilities on August 13, 2014. The company executed Amendment No. 4 to its Term Loan Credit Agreement and a First Amendment to its Asset-Based Revolving Credit Agreement (ABL). These amendments are crucial for investors as they involve a substantial refinancing of debt, increased flexibility, and changes to covenants. The primary impact for investors is the refinancing of existing term B-2 loans into a larger term B-3 loan facility, along with the redemption of higher-cost senior notes. This move aims to improve the company's capital structure and reduce interest expenses. Furthermore, the amendments grant BCFWC and its subsidiaries greater operational and financial flexibility, including increased capacity for incremental debt, investments, restricted payments, and a relaxation of certain financial performance covenants such as consolidated leverage, interest coverage, and capital expenditures. This suggests a strategic shift towards greater financial agility.

Key Highlights

  • 1Burlington Coat Factory Warehouse Corporation (BCFWC), an indirect subsidiary, entered into significant amendments to its Term Loan and ABL credit facilities on August 13, 2014.
  • 2The Term Loan Credit Agreement was amended to refinance $830.6 million in Term B-2 loans into $1.2 billion of Term B-3 loans, extending maturity to August 13, 2021.
  • 3The amendments facilitated the full redemption of BCFWC's 10% Senior Notes due 2019 and Burlington Holdings, LLC's 9.00%/9.75% Senior Notes due 2018.
  • 4Increased flexibility was granted for incremental debt, with the available amount rising from $150 million to $400 million, plus unlimited amounts if the pro forma consolidated secured leverage ratio does not exceed 3.50 to 1.00.
  • 5Key financial performance covenants were removed from the Term Loan Agreement, including consolidated leverage ratio, consolidated interest ratio, and capital expenditures.
  • 6The interest rate margin for the ABL Line of Credit was reduced, with LIBOR-based loans now ranging from 1.25% to 1.50%, down from 1.75% to 2.25%.
  • 7The ABL Line of Credit maturity remains August 13, 2019.

Frequently Asked Questions

The primary financial impact is the refinancing of existing debt. The company replaced $830.6 million in term B-2 loans with $1.2 billion in term B-3 loans, which likely carries a more favorable interest rate structure and extends the maturity. Additionally, the company redeemed higher-cost senior notes, aiming to reduce overall interest expenses and improve its capital structure.

The amendments significantly increase financial and operational flexibility. This includes a higher capacity for taking on additional debt, making investments, distributing dividends, and granting liens. Crucially, several financial covenants such as consolidated leverage ratio, interest coverage ratio, and capital expenditure limits have been removed from the term loan agreement, allowing management more discretion in strategic decision-making.

Removing covenants like the consolidated leverage ratio, consolidated interest ratio, and capital expenditure limits provides management with greater freedom to pursue growth strategies, make acquisitions, or manage cash flows without immediate technical breaches of loan agreements. However, investors should monitor the company's financial performance closely, as these removed covenants provided a baseline of financial discipline that is now based on management's discretion and the terms of the new, broader incremental debt provisions.

The Term B-3 loans under the Amended Term Loan Credit Agreement mature on August 13, 2021, seven years from the closing date of the amendment. The ABL Line of Credit matures on August 13, 2019, five years from the closing date.