XML 27 R17.htm IDEA: XBRL DOCUMENT v3.24.0.1
DEBT
 6 Months Ended
Dec. 30, 2023
Debt Disclosure [Abstract]  
DEBT DEBT
The following table summarizes the components of the Company’s outstanding debt:
December 30,
2023		July 1,
2023
(millions)
Current debt:
Term Loan due 2027$25.0 $25.0 
Total current debt$25.0 $25.0 
Long-term debt:
Term Loan due 2027$431.3 $443.8 
USD Senior Notes:
4.250% Senior Notes due 2025
303.4 303.4 
7.050% Senior Notes due 2025
500.0 — 
7.000% Senior Notes due 2026
750.0 — 
4.125% Senior Notes due 2027
396.6 396.6 
7.350% Senior Notes due 2028
1,000.0 — 
7.700% Senior Notes due 2030
1,000.0 — 
3.050% Senior Notes due 2032
500.0 500.0 
7.850% Senior Notes due 2033
1,250.0 — 
EUR Senior Notes:
5.350% EUR Senior Notes due 2025(1)
552.1 — 
5.375% EUR Senior Notes due 2027(1)
552.1 — 
5.875% EUR Senior Notes due 2031(1)
552.1 — 
Total long-term debt7,787.6 1,643.8 
Less: Unamortized discount and debt issuance costs on Senior Notes(73.2)(8.0)
Total long-term debt, net$7,714.4 $1,635.8 
(1)The carrying amounts of the Capri Acquisition EUR Senior Notes (as defined below) include the impact of changes in the exchange rate of the United States Dollar against the Euro.
During the three and six months ended December 30, 2023, the Company recognized interest expense related to its debt of $88.6 million and $110.9 million, respectively, which is inclusive of $25.9 million and $28.5 million, respectively, related to Bridge Facility (as defined below) financing fees. During the three and six months ended December 31, 2022, the Company recognized interest expense related to its debt of $18.1 million and $34.4 million, respectively.
Capri Holdings Limited Merger Agreement
On August 10, 2023, the Company entered into a Merger Agreement. The Company intends to finance the Capri Acquisition, inclusive of related fees and expenses, with the net proceeds of new senior unsecured notes, new term loans, cash on hand, cash on hand at Capri and anticipated future cash flow. During the quarter ended December 30, 2023, the Company issued $4.5 billion Capri Acquisition USD Senior Notes and €1.5 billion Capri Acquisition EUR Senior Notes which, in addition to the $1.4 billion of delayed draw Capri Acquisition Term Loan Facilities executed in the first quarter of fiscal 2024, completes the expected financing for the Capri Acquisition. Refer to Note 5, "Acquisitions" for further information.
Bridge Facility
In connection with our entry into the Merger Agreement, the Company entered into a commitment letter, dated as of August 10, 2023, with Bank of America, N.A., Morgan Stanley Senior Funding, Inc. and the other commitment parties party thereto, to provide a 364-day senior unsecured bridge loan facility in an aggregate principal amount of up to $8.0 billion (the "Bridge Facility") to fund the purchase price of the Capri Acquisition and to pay related fees and expenses. Upon entering into the Capri Acquisition Term Loan Agreement (as defined below) and, as a result of the commitments thereunder with respect to the Capri Acquisition Term Loan Facilities (as defined below), the Bridge Facility commitments were reduced to $6.6 billion. In November 2023, the Bridge Facility was terminated upon the issuance of approximately $6.1 billion of the Capri Acquisition Senior Notes by the Company. Refer to the "Capri Acquisition USD Senior Notes" and "Capri Acquisition EUR Senior Notes" paragraphs below.
Capri Acquisition Term Loan Facilities
On August 30, 2023, the Company entered into a definitive credit agreement (such agreement, the "Capri Acquisition Term Loan Credit Agreement") whereby Bank of America, N.A, as administrative agent, and the other agents party thereto, and a syndicate of banks and financial institutions have committed to lend the Company, subject to the satisfaction or waiver of the conditions set forth in the Term Loan Agreement, a $1.05 billion unsecured term loan facility maturing three years after the term loans thereunder are borrowed (the “Three-Year Term Loan Facility”) and a $350 million term loan facility maturing five years after the term loans thereunder are borrowed (the “Five-Year Term Loan Facility”; and collectively with the Three-Year Term Loan Facility, the “Capri Acquisition Term Loan Facilities”). The Company plans to use borrowings under the Capri Acquisition Term Loan Facilities to pay a portion of the consideration for the Capri Acquisition and to pay related fees and expenses.
Borrowings under the Capri Acquisition Term Loan Facilities bear interest at a rate per annum equal to, at the Company’s option, either (a) an alternate base rate or (b) a rate based on the forward-looking Secured Overnight Financing Rate ("SOFR") term rate administered by CME Group Benchmark Administration Limited (or any successor administrator) plus, in each case, an applicable margin. The applicable margin will be adjusted by reference to a grid based on the ratio of (a) consolidated debt (with certain customary deductions for unrestricted cash and permitted investments) to (b) consolidated EBITDAR. The applicable margin will initially be (x) in the case of the Three-Year Term Loan Facility, 0.250% for base rate loans and 1.250% for SOFR loans and (y) in the case of the Five-Year Term Loan Facility, 0.375% for base rate loans and 1.375% for SOFR loans. Additionally, the Company will pay a ticking fee of 0.15% on the average daily amount of the unused commitments of the Capri Acquisition Term Loan Facilities. There were no outstanding borrowings on the Capri Acquisition Term Loan Facilities as of December 30, 2023.
$2.0 Billion Revolving Credit Facility
On August 30, 2023, pursuant to that certain Amendment No. 1 to Credit Agreement (the "Amendment"), the Company amended its Existing Credit Agreement (as defined below), originally dated as of May 11, 2022, among the Company, as borrower, certain of our subsidiaries, as guarantors, Bank of America, N.A., as administrative agent, and the financial institutions parties thereto as lenders (the "Existing Credit Agreement", and as amended by the Amendment, the "Amended Credit Agreement"). Under the Amended Credit Agreement, a syndicate of financial institutions and other lenders provided increases to the aggregate commitments to the revolving facility under the Existing Credit Agreement from $1.25 billion to $2.0 billion (the “Revolving Facility”). The Revolving Facility will mature on May 11, 2027.
Borrowings under the Revolving Facility bear interest at a rate per annum equal to, at the Company’s option, (i) for borrowings in U.S. Dollars, either (a) an alternate base rate or (b) a rate based on the forward-looking SOFR term rate administered by CME Group Benchmark Administration Limited (or any successor administrator satisfactory to the administrative agent), (ii) for borrowings in Euros, the Euro Interbank Offered Rate, (iii) for borrowings in Pounds Sterling, the Sterling Overnight Index Average Reference Rate and (iv) for borrowings in Japanese Yen, the Tokyo Interbank Offer Rate, plus, in each case, an applicable margin. The applicable margin will be adjusted by reference to a grid (the “Pricing Grid”) based on the ratio of (a) consolidated debt to (b) consolidated EBITDAR. Additionally, the Company will pay facility fees, calculated at a rate per annum determined in accordance with the Pricing Grid, on the full amount of the Revolving Facility, payable quarterly in arrears, and certain fees with respect to letters of credit that are issued. The Revolving Facility may be used to finance the working capital needs, capital expenditures, permitted investments, share purchases, dividends, and other general corporate purposes of the Company and its subsidiaries (which may include commercial paper backup). Additionally, up to $250 million of the Revolving Facility will be available on a funds certain basis to fund the purchase price of the Capri Acquisition and to pay related fees and expenses. There were no outstanding borrowings on the Revolving Facility as of December 30, 2023.
Capri Acquisition USD Senior Notes
On November 27, 2023, the Company issued $4.5 billion aggregate principal amount of senior unsecured notes, consisting of $500.0 million aggregate principal amount of 7.050% senior unsecured notes due November 27, 2025 at 99.890% of par (the “7.050% Senior Notes due 2025”), $750.0 million aggregate principal amount of 7.000% senior unsecured notes due November 27, 2026 at 99.803% of par (the “7.000% Senior Notes due 2026”), $1.0 billion aggregate principal amount of 7.350% senior unsecured notes due November 27, 2028 at 99.724% (the “7.350% Senior Notes due 2028”), $1.0 billion aggregate principal amount of 7.700% Senior Notes due November 27, 2030 at 99.712% of par (the “7.700% Senior Notes due 2030”) and $1.25 billion aggregate principal amount of our 7.850% Senior Notes due November 27, 2033 at 99.475% (the “7.850% Senior Notes due 2033" and, together with the 7.050% Senior Notes due 2025, the 7.000% Senior Notes due 2026, the 7.350% Senior Notes due 2028 and the 7.700% Senior Notes due 2030, the “Capri Acquisition USD Senior Notes”). The Company will pay interest semi-annually on the Capri Acquisition USD Senior Notes on May 27 and November 27 of each year, commencing on May 27, 2024.
If (i) the Capri Acquisition has not been completed by February 10, 2025 (or such later date mutually agreed between the Company and Capri) (such date, the “special mandatory redemption end date”), (ii) prior to the special mandatory redemption end date, the Merger Agreement is terminated in accordance with its terms or (iii) the Company otherwise notifies the trustee that it will not pursue the consummation of the Capri Acquisition, all of the Capri Acquisition USD Senior Notes will be redeemed at a redemption price equal to 101% of their principal amount, plus accrued and unpaid interest to, but excluding, the special mandatory redemption date.
Capri Acquisition EUR Senior Notes
On November 27, 2023, the Company issued €1.5 billion aggregate principal amount of senior unsecured notes, consisting of €500.0 million aggregate principal amount of 5.350% senior unsecured notes due November 27, 2025 at 99.878% of par (the “5.350% EUR Senior Notes due 2025”), €500.0 million aggregate principal amount of 5.375% senior unsecured notes due November 27, 2027 at 99.723% of par (the 5.375% EUR Senior Notes due 2027”) and €500.0 million aggregate principal amount of our 5.875% senior unsecured notes due November 27, 2031 at 99.248% of par (the “5.875% EUR Senior Notes due 2031" and, together with the 5.350% EUR Senior Notes due 2025 and the 5.375% EUR Senior Notes due 2027, the “Capri Acquisition EUR Senior Notes” and, together with the Capri Acquisition USD Senior Notes, the "Capri Acquisition Senior Notes"). The Company will pay interest annually on the Capri Acquisition EUR Senior Notes on November 27 of each year, commencing on November 27, 2024. As of December 30, 2023, the carrying amount for each of the Capri Acquisition EUR Senior Notes was $552.1 million.
If (i) the Capri Acquisition has not been completed by the special mandatory redemption end date, (ii) prior to the special mandatory redemption end date, the Merger Agreement is terminated in accordance with its terms or (iii) the Company otherwise notifies the trustee that it will not pursue the consummation of the Capri Acquisition, all of the Capri Acquisition EUR Senior Notes will be redeemed at a redemption price equal to 101% of their principal amount, plus accrued and unpaid interest to, but excluding, the special mandatory redemption date.
2027 Term Loan
On May 11, 2022, pursuant to the Existing Credit Agreement, the Company entered into an unsecured $500.0 million Term Loan (the “Term Loan due 2027”) which matures on May 11, 2027. The Term Loan due 2027 amortizes in an amount equal to 5.000% per annum, with payments made quarterly. As of December 30, 2023, $25.0 million of the Term Loan due 2027 is included in Current debt on the Consolidated Balance Sheets. Borrowings under the Term Loan due 2027 bear interest at a rate per annum equal to, at the Company’s option, either (i) an alternate base rate or (ii) a term secured overnight financing rate plus, in each case, an applicable margin. The applicable margin will be adjusted by reference to a pricing grid based on the ratio (a) consolidated debt to (b) consolidated EBITDAR.
2025, 2027, 2032 Senior Notes
In March 2015, the Company issued $600.0 million aggregate principal amount of 4.250% senior unsecured notes due April 1, 2025 at 99.445% of par (the "4.250% Senior Notes due 2025"). In June 2017, the Company issued $600.0 million aggregate principal amount of 4.125% senior unsecured notes due July 15, 2027 at 99.858% of par (the 4.125% Senior Notes due 2027"). In December 2021, the Company completed a cash tender offer for $296.6 million and $203.4 million of the outstanding aggregate principal amount under its 4.250% Senior Notes due 2025 and 4.125% Senior Notes due 2027, respectively. In addition, in December 2021, the Company issued $500.0 million aggregate principal amount of 3.050% senior unsecured notes due March 15, 2032 at 99.705% of par (the "3.050% Senior Notes due 2032").
Debt Covenants
Under the terms of our debt facilities, we must comply with certain restrictions limiting the Company’s ability to among other things: (i) incur certain indebtedness, (ii) create certain liens, (iii) enter into certain sale and leaseback transactions, (iv) make certain investments or payments and (v) merge, or consolidate or transfer, sell or lease all or substantially all of the Company’s assets.
Under the Amended Credit Agreement, we are required to comply on a quarterly basis with a maximum net leverage ratio of 4.00:1.00. After giving effect to the Capri Acquisition, the Company will be required under the Amended Credit Agreement and the Capri Acquisition Term Loan Agreement to comply on a quarterly basis with a maximum net leverage ratio of (i) from and including the closing date of the Capri Acquisition to but excluding June 28, 2025, 4.75 to 1.00, (ii) from and including June 28, 2025 to but excluding June 27, 2026, 4.50 to 1.00, and (iii) from and including June 27, 2026 and thereafter, 4.00 to 1.00. As of December 30, 2023, we were in compliance with these restrictions and covenants, have met such financial ratios and have met all debt payment obligations.
Fair Value Considerations
The following table shows the estimated fair values of the senior unsecured notes at December 30, 2023 and July 1, 2023 based on external pricing data, including available quoted market prices of the instruments, and consideration of comparable debt instruments with similar interest rates and trading frequency, among other factors, and is classified as Level 2 measurements within the fair value hierarchy:
December 30,
2023		July 1,
2023
(millions)
USD Senior Notes:
4.250% Senior Notes due 2025
299.7 295.1 
7.050% Senior Notes due 2025
511.8 — 
7.000% Senior Notes due 2026
777.9 — 
4.125% Senior Notes due 2027
378.5 371.7 
7.350% Senior Notes due 2028
1,049.8 — 
7.700% Senior Notes due 2030
1,055.1 — 
3.050% Senior Notes due 2032
407.5 399.5 
7.850% Senior Notes due 2033
1,337.1 — 
EUR Senior Notes:
5.350% EUR Senior Notes due 2025(1)
563.5 — 
5.375% EUR Senior Notes due 2027(1)
571.8 — 
5.875% EUR Senior Notes due 2031(1)
580.6 — 
(1)The fair values of the Capri Acquisition EUR Senior Notes include the impact of changes in the exchange rate of the United States Dollar against the Euro.