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Bank of America Agents $500MM Incremental Term Debt Financing for RH

May 17, 2022, 07:59 AM
Filed Under: Retail

RH announced the completion of an incremental $500 million term debt financing.

Consistent with the strategy of the original $2.0 billion term debt financing in October, 2021, the additional $500 million represents an attractive cost of capital and provides optionality that will enable RH to be opportunistic in creating long term value for shareholders.

The $500 million term debt financing (the “2022 Incremental Term Debt”) was completed by means of a 2022 Incremental Amendment through RH’s subsidiary, Restoration Hardware, Inc. (“RHI”), as the borrower, and Bank of America, N.A. as administrative agent (in such capacity, the “Term Agent”) and lender, amending the Term Loan Credit Agreement, dated as of October 20, 2021 (the “Existing Credit Agreement”; the Existing Credit Agreement as amended by the 2022 Incremental Amendment, the “Amended Credit Agreement”), by and among RHI as the borrower, the lenders party thereto and the Term Agent.

The 2022 Incremental Term Debt has a maturity date of October 20, 2028 and bears interest at an annual rate based on the Secured Overnight Financing Rate (“SOFR”) plus a credit spread adjustment of 0.10% plus an interest rate margin of 3.25% subject to a 0.50% SOFR floor.

The Company anticipates that the additional interest expense as a result of the 2022 Incremental Term Debt will be approximately $4.5 million on an after-tax basis for each fiscal quarter assuming current interest rate levels. Together with the initial $2.0 billion term loan pursuant to the Existing Credit Agreement, the interest rate cost on an after-tax basis for the aggregate $2.5 billion of term debt under the Amended Credit Agreement is expected to be approximately $17 million per fiscal quarter based on current interest rates.

The issuance of the 2022 Incremental Term Debt was assigned a Ba3 rating from Moody’s Investors Service and BB rating from S&P Global.

Proceeds of the 2022 Incremental Term Debt are expected to be used for general corporate purposes.

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