Ross Stores gets $500 million 364-day revolver, amends existing loan

By Sarah Lizee

Olympia, Wash., May 6 – Ross Stores, Inc. entered into a $500 million 364-day revolving credit agreement with Bank of America, NA as administrative agent on Friday, according to an 8-K filing with the Securities and Exchange Commission.

Loans bear interest at Libor plus 175 basis points to 250 bps based on ratings, subject to a Libor floor of 0.75%.

There is also a commitment fee of between 25 bps and 40 bps, based on ratings and the aggregate unfunded commitments under the facility.

The facility includes customary conditions to credit extensions, and requires the company, after giving pro forma effect to any credit extensions and the application of the proceeds thereof, to have unrestricted cash and cash equivalents not in excess of $1 billion.

Other covenants include

• A consolidated adjusted debt to EBITDAR ratio of no less than 4.5 to 1.0 for the period ending Jan. 30, 2021, determined based on the consolidated EBITDAR for the fiscal quarter ending Jan. 30, 2021 multiplied by four;

• A minimum liquidity requirement for the company to maintain at least $800 million in the aggregate of (a) unrestricted cash and cash equivalents and (b) borrowing availability under the 364-day credit facility and the existing credit facility;

• Restrictions on debt of the company and its subsidiaries, with a $50 million limit on subsidiary debt;

• Limitations on liens, with a general lien restriction of $50 million and a limitation on subsidiary liens of $50 million; and

• Restrictions on repurchases of company stock, with exceptions for certain financing transactions and for share repurchases relating to equity compensation including for tax withholding.

The facility was undrawn at close.

The company said it entered into the credit agreement to add to its potential sources of liquidity, and to provide additional financial flexibility due to uncertain market conditions arising from the impact of the Covid-19 pandemic.

The company also amended its existing credit agreement with BofA dated July 1, 2019 to modify some of the financial covenants and other provisions.

The covenants were amended in a manner consistent with the corresponding covenants in the 364-day credit facility, including:

• Removal of the consolidated adjusted debt to EBITDAR ratio test for periods prior to the fiscal quarter ending Jan. 30, 2021;

• Beginning with the fiscal quarter ending Jan. 30, 2021, a consolidated adjusted debt to EBITDAR ratio, initially requiring a ratio of no less than 4.5 to 1.0, declining to 3.5 to 1.0 for fiscal quarters ending April 29, 2023 and onwards, with consolidated EBITDAR determined based upon an annualization of consolidated EBITDAR during the first three fiscal quarters ending on and after Jan. 30, 2021;

• While the 364-day credit facility remains in effect and until the company provides certification of its compliance with financial covenants for the quarter ending Jan. 30, 2021, the same minimum liquidity covenant as is required under the 364-day credit facility; and

• Restrictions on debt of the company and its subsidiaries, with a $50 million limit on subsidiary debt.

In March, the company borrowed $800 million under the existing credit facility, which bears interest at 1.61%, based on Libor plus 75 bps at time of borrowing, to add to its cash balances in order to provide enhanced financial flexibility due to uncertain market conditions arising from the impact of the Covid-19 pandemic.

Based in Dublin, Calif., Ross owns a chain of discount department stores.

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