Gap Inc. Announces Closing of $2.250 Billion of Senior Secured Notes Offering and $1.868 Billion ABL Credit Facility
May 07 2020 - 12:59PM
Business Wire
Further Strengthens Financial Position in
Response to the Impacts of COVID-19
Gap Inc. (NYSE: GPS) today announced it has closed its
previously announced offering of $2.250 billion of senior secured
notes and that it has entered into an asset-based revolving credit
facility with an initial aggregate principal amount of $1.868
billion. The company also announced it has repaid the outstanding
$500 million borrowed under its prior revolving credit facility,
and no amounts were borrowed at close under the asset-based
revolving credit facility.
“We’re pleased these notes and credit facility, along with other
strategic and cash preservation actions we’ve taken to date, enable
us to further fuel our brands and operations,” said Katrina
O’Connell, EVP and CFO, Gap Inc.
“With our strengthened balance sheet, we continue to build
towards our future, beginning with welcoming our teams and
customers back into some of our stores this week,” said Sonia
Syngal, President and CEO, Gap Inc. “From the onset of the global
pandemic, the company has evaluated a wide range of scenarios
related to the impacts of COVID-19 to develop operating and
liquidity plans that leverage our strengths and allow us to adapt
to this unprecedented and evolving environment.”
As previously announced, the company moved swiftly to mitigate
the impact of the pandemic on its operations, taking a number of
proactive measures to strengthen its financial position to manage
through the most conservative of circumstances:
- The company has continued to serve customer demand through its
scaled e-commerce platform, which at over $4 billion in net sales,
represented about one quarter of the company’s sales in fiscal
2019.
- The company is leveraging its advantaged omni-network with ship
from store at over 1,000 locations in 48 states and curbside pickup
in dozens of stores, with plans to double those locations this
month, to support fulfillment of online demand which has
accelerated meaningfully as more customers shopped from home.
- The company is reducing operating expenses across all aspects
of the organization, including through previously announced
executive pay and headquarters headcount reductions as it seeks to
streamline operations and better align talent and financial
resources against the company’s strategic priorities.
- Through longstanding strategic partnerships with its suppliers
and leveraging the flexibility in its supply chain, the company is
meaningfully reducing forward inventory receipts.
- Beginning in April, the company made the decision to suspend
rent payments for the period stores are closed as a result of local
and state mandates. As part of the company’s ongoing specialty
fleet optimization efforts, the company has undertaken a strategic
review of its real estate portfolio to further advance its
long-term strategic priorities that include a smaller, healthier
fleet of Gap brand stores.
- The company enacted several measures to further strengthen its
cash position and financial flexibility, including deferring its
previously declared first quarter dividend, suspending its
quarterly cash dividend and share repurchases for the remainder of
the fiscal year, reducing capital expenditures by approximately
$300 million, and extending the payment terms with the majority of
its merchandise and non-merchandise vendors.
- A portion of the proceeds of the notes is being used to redeem
the previously issued $1.25 billion unsecured notes due April 2021.
This new capital structure will set the company up to navigate the
crisis well.
The company noted the cost savings and cash flow impact of
actions taken to date are expected to have a more meaningful impact
beginning with the second quarter of fiscal year 2020 compared to
the first quarter of fiscal year 2020 given most were enacted
towards the latter end of the first quarter.
The notes were offered in a private placement to qualified
institutional buyers pursuant to Rule 144A and Regulation S under
the Securities Act of 1933, as amended (the "Securities Act"). The
notes have not been registered under the Securities Act or state
securities laws and may not be offered or sold in the United States
absent registration or pursuant to an applicable exemption from the
registration requirements of the Securities Act and any applicable
state securities laws.
About Gap Inc.
Gap Inc. is a leading global retailer offering clothing,
accessories, and personal care products for men, women, and
children under the Old Navy, Gap, Banana Republic, Athleta,
Intermix, Janie and Jack, and Hill City brands. Fiscal year 2019
net sales were $16.4 billion. Gap Inc. products are available for
purchase in more than 90 countries worldwide through
company-operated stores, franchise stores, and e-commerce sites.
For more information, please visit www.gapinc.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. All statements other than those that are purely
historical are forward-looking statements. Words such as "expect,"
"anticipate," "believe," "estimate," "intend," "plan," “will,” and
similar expressions also identify forward-looking statements.
Forward-looking statements include, without limitation, statements
relating to the company’s ability to sustain and adapt to a
prolonged slow down related to COVID-19, the ability to reduce
operating expenses, and the intended use of the proceeds from the
notes and the credit facility.
Because these forward-looking statements involve risks and
uncertainties, there are important factors that could cause the
company’s actual results to differ materially from those in the
forward-looking statements.
Additional information regarding these factors that could cause
results to differ can be found in the company’s Annual Report on
Form 10-K for the fiscal year ended February 1, 2020, the company's
Current Report on Form 8-K filed on April 23, 2020, as well as the
company’s subsequent filings with the Securities and Exchange
Commission. These forward-looking statements are based on
information as of May 7, 2020. The company assumes no obligation to
publicly update or revise its forward-looking statements even if
experience or future changes make it clear that any projected
results expressed or implied therein will not be realized.
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version on businesswire.com: https://www.businesswire.com/news/home/20200507005836/en/
Investor Relations Contact: Tina Romani (415) 427-5264
Investor_relations@gap.com
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