Wed 07/01/2020 16:46 PM
Relevant Items:
Covenants Tear Sheet and Debt Document Summaries
Burlington’s Debt Documents


The below article includes new analysis of Burlington Stores Inc. and an issuer covenant card from the Covenants by Reorg team.


Burlington Stores Inc. is a U.S.-based retailer of fashion-focused merchandise, including women's ready-to-wear apparel, accessories, footwear, menswear, youth apparel, coats, toys, and gifts, as well as baby, home and beauty products. The company has 736 stores in 45 states. On March 19, the company announced that it had closed all of its stores due to the Covid-19 pandemic. As a result, the company reported first-quarter adjusted EBITDA of negative $445 million. Further, during the quarter ended May 2, the company issued $700 million of 2.25% convertible senior notes due 2025, $300 million of 6.25% senior secured notes due 2025 in April and drew $400 million from its $600 million ABL facility to shore up its liquidity. Continue reading for the full covenants analysis from Reorg.


On its first-quarter earnings call, the company disclosed that as of May 28, it had reopened 332 of its stores and estimated a total of 400 would be reopened by the end of May. The company further disclosed:

 
“For the stores we have reopened to-date, we have been surprised and pleased with the traffic and sales that we have seen. These stores are experiencing sales levels that are ahead of the comparable period last year. There is clearly pent-up demand and we do not know how long this sales trend will continue.”



The company’s capital structure and leverage metrics as of May 2 are shown below.

 
Burlington Stores Inc.'s capital structure and leverage metrics as of May 2


Covenant Conclusions

 

  • The company’s ABL facility includes a 1x FCCR financial maintenance covenant that is tested whenever excess availability is less than the greater of $50 million and 10% of total loan cap. The total loan cap is $600 million, 10% of which is $60 million. Availability is currently $151 million.

     

  • The company can currently incur $500 million of additional debt under the ABL facility, $849 million of debt that is pari to the term loan and senior secured notes, at least $66 million of structurally senior debt and an uncapped amount of unsecured debt up to a 2x interest coverage ratio. Once financials are delivered for the quarter ending Aug. 1, the company will have an additional $1.38 billion of capacity to incur debt that is pari to the term loan and senior secured notes.

     

  • The company can currently pay $145 million in dividends and make $133 million of general investments, $66 million of investments in unrestricted subsidiaries and joint ventures and $332 million of investments in nonguarantor restricted subsidiaries plus additional investments under the available amount; it can also make $133 million in prepayments. Once financials are delivered for the quarter ending Aug. 1, the company will have significantly more capacity to pay dividends and make prepayments.

     

  • The company is not restricted from purchasing the convertible notes in the open market.


 

Senior Secured Notes



During the quarter ended May 2, the company issued 6.25% senior secured notes. The notes’ negative covenants package contains a restrictions period, which restricts the company from utilizing certain of its debt, lien, restricted payment, investment and prepayment baskets.


The restrictions period ends on the “Ratio Resumption Date,” which is defined as the date on which financials for the quarter ending Aug. 1 are delivered. When the restrictions period ends, the company will have significantly more capacity to incur debt and liens, pay dividends, make investments and prepay debt.


A summary of the restrictions is shown below:

 
Burlington Stores Inc.'s senior secured notes restrictions period summary


 
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