Mon 12/27/2021 07:00 AM
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Relevant Documents:
Qurate Retail 10-K 2020
Qurate Retail 10-Q Q3 2021
Qurate Group 8-K 10/27/21
QVC/Zulily Fifth Amended and Restated Credit Agreement
Qurate Conference Presentation

On Monday, Dec. 20, QVC Inc., a wholly owned subsidiary of Qurate Retail Inc., issued a statement that on Dec. 18 its QVC Rocky Mount Inc. fulfillment center in North Carolina experienced a fire. Rocky Mount is the company’s second-largest fulfillment center, processing approximately 25% to 30% of volume for both its QVC and HSN businesses, and it is the company’s primary returns center for hard goods. On the news, the company’s Series A stock fell 11.6% on the day, but it has since recovered to levels prior to the news. The company’s 4% notes due 2029, debt of intermediate parent Liberty Interactive, fell from 76.70 to 75.50 before recovering to 76.50, according to Solve Advisors.

In light of the fire, Reorg has analyzed Qurate’s capital structure and organizational structure. The company’s capital structure can be thought of in three main buckets: (i) debt that is secured by all Qurate operating subsidiaries including QVC, Zulily and Cornerstone, (ii) debt secured by just QVC entities and (iii) unsecured debt at intermediate holdco Liberty Interactive, which is a parent company of QVC and partial owner of Cornerstone.

As of Sept. 30, Qurate Retail Inc. had $6.9 billion of consolidated total debt, $1.3 billion of preferred stock and $798 million of consolidated unrestricted cash and equivalents. Total debt included $288 million of QVC, Zulily and Cornerstone secured debt, $4.5 billion of QVC secured debt, $210 million of QVC unsecured debt and $2 billion of Liberty Interactive unsecured debt.

Subsequent to the end of the third quarter, on Oct. 27, Qurate further amended and restated its credit agreement and issued a notice to redeem all of its 3.5% exchangeable debentures due 2031 in full on Dec. 13. See below for a pro forma capital structure reflecting these transactions.

(Click HERE to enlarge.)

QVC Inc., Zulily LLC, QVC Global Corporate Holdings LLC and Cornerstone Brands Inc. are borrowers under the company’s $3.25 billion commitment revolving credit facility. The “Material Domestic Subsidiaries” of QVC Inc., Zulily LLC, QVC Global Corporate Holdings LLC and Cornerstone Brands Inc. and certain other subsidiaries provide guarantees for the RCF. The facility is secured, pari passu with QVC Inc.’s existing senior secured notes, by a pledge of all of QVC Inc.’s equity interests. The RCF is further secured by a lien on all of Zulily’s and Cornerstone's equity interests, unlike QVC Inc.’s senior secured notes.

An organizational chart from QVC’s investor presentation on Dec. 14 is shown below:

(Click HERE to enlarge.)

Qurate Retail Inc., formerly known as Liberty Interactive Corp. prior to the reorganization agreement among General Communications Inc., Liberty Interactive LLC and a direct wholly owned subsidiary of Qurate Retail in 2018, owns interests in subsidiaries and other companies that are primarily engaged in the video and online commerce industries. Qurate Retail Inc.’s principal businesses and assets include its consolidated subsidiaries QVC Inc., which includes HSN Inc., Zulily LLC, Cornerstone Brands Inc. and other cost and equity method investments. On Sept. 23, 2011, Qurate Retail completed the splitoff of a wholly owned subsidiary, Liberty Media Corp., or LMC, resulting in Qurate Retail and LMC operating as separately publicly traded companies with neither having any stock ownership in the other.

See below for a revenue and adjusted OIBDA segment breakdown.

QxH, which includes QVC and HSN in the United States, and QVC International generated approximately 80.5% of revenue and 70.1% of adjusted OIBDA on a LTM basis as of Sept. 30. Zulily accounted for 11.1% of LTM revenue but contributed only 0.3% to adjusted OIBDA. Cornerstone generated approximately 8.4% of LTM revenue and 4.1% of adjusted OIBDA.

The company includes a further breakdown of results including Cornerstone below:

 
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