VF tackles crisis through improved liquidity, fortress balance sheet

By Devika Patel

Knoxville, Tenn., May 15 – VF Corp. issued $3 billion of debt last quarter and repaid its revolver in a bid to increase the company’s liquidity as it navigates through the uncertainty caused by the Covid-19 pandemic.

“VF entered this crisis with a fortress balance sheet and strong liquidity,” executive vice president and chief financial officer Scott A. Roe said on the company’s fourth quarter and year ended March 28 earnings conference call on Friday.

“Prior to the outbreak, our leverage was below 2x, and we had significant dry powder to execute our M&A agenda.

“Just a handful of months later, the whole world changed.

“Revenue across our sector froze overnight, resulting in high rates of cash burn and disruption across the retail landscape,” Roe said.

The company issued $3 billion of senior notes in the quarter and repaid its revolver to improve liquidity.

“These are uncertain times, but in this moment of turmoil, we demonstrated both our willingness and our ability to tangibly build excess liquidity to weather the disruption caused by Covid for a prolonged period,” Roe said.

“With this in mind, we elected to raise $3 billion of longer-dated debt last month and fully repay our revolver, providing VF with more than $5 billion of immediate liquidity.

“While our recent actions may ultimately prove conservative, given the current uncertainty surrounding the retail sector, our actions are a clear testament of VF’s balance sheet flexibility and financial strength,” Roe said.

The company’s executives believe that VF is prepared to handle these uncertain times through its strong balance sheet.

“Through the first 10 months of the year, VF had a powerful momentum, tracking ahead of our long-range plan and while Covid has profoundly impacted the world, as well as our business for the last two months of our fiscal year, I have never been more confident in our people, our brands and our future,” chairman, president and chief executive officer Steve Rendle said on the call.

“It’s times like these that serve as a purifying fire, separating the best companies from the rest.

“We have prepared ourselves well for times such as this.

“Our strong brands, our financial and supply chain disciplines, coupled with our fortress balance sheet, allows us to weather almost any storm.

“I’m confident that VF will emerge from this crisis in a position of strength, prepared to accelerate at a time when many are under tremendous financial strain and unable to adequately invest in their business,” Rendle said.

On April 21, VF priced $3 billion of senior notes (A3/A) in four tranches.

A $1 billion offering of 2.05% two-year notes priced at a spread of 185 basis points over Treasuries, compared to initial talk in the 195 bps area. The notes were placed at 99.982 to yield 2.059%.

VF sold $750 million of 2.4% five-year notes at 99.827 to yield 2.437% and a Treasuries plus 210 bps spread.

The five-year notes were talked at the 220 bps spread area.

A $500 million tranche of 2.8% seven-year notes priced at 99.836 to yield 2.826% and a spread of 235 bps over Treasuries, compared to initial guidance in the 250 bps over Treasuries area.

In the final tranche, $750 million of 2.95% 10-year notes priced at 99.785 to yield 2.975%, or a Treasuries plus 240 bps spread.

The 10-year notes were initially talked to print at the 255 bps spread area.

Barclays, BofA Securities Inc., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, HSBC Securities (USA) Inc., ING Financial Markets LLC, U.S. Bancorp Investments Inc. and Wells Fargo Securities LLC were the bookrunners.

Proceeds from the bond offering were earmarked to repay borrowings under the company’s senior revolving credit facility, with any remaining proceeds used for general corporate purposes.

The clothing company is based in Greensboro, N.C.

© 2015 Prospect News.
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