8-K: Bath & Body Works Amends and Restates Revolving Credit Facility

Bath & Body Works entered into an amendment and restatement of its senior secured asset-based revolving credit facility (ABL Facility) on May 22, 2025, extending the maturity and modifying terms.

Summary

• On May 22, 2025, Bath & Body Works amended and restated its senior secured asset-based revolving credit facility (ABL Facility).
• The ABL Facility's maturity date is five years after closing, with a possible 91-day reduction based on excess availability and EBITDAR to fixed charges ratio related to senior notes.
• The facility allows borrowing and letters of credit in U.S. and Canadian dollars, based on a borrowing base formula.
• The borrowing base includes 95% of eligible credit card receivables, 85% of eligible accounts receivable, and 90% (or 92.5% during high-season) of the net orderly liquidation value of eligible inventory, plus 50% of eligible component inventory and 50% of eligible real property (up to $150 million or 25% of the borrowing base).
• Interest rates are based on SOFR or an alternative base rate, or CORRA or a Canadian prime rate, plus a margin depending on excess availability.
• Unused commitments accrue a fee ranging from 0.25% to 0.30%.
• Obligations are guaranteed by Bath & Body Works' domestic and Canadian subsidiaries and secured by first priority liens on ABL Priority Collateral and second-priority liens on Non-ABL Priority Collateral.
• The ABL Facility contains covenants restricting the ability to incur debt or grant liens.
• A financial maintenance covenant requires maintaining a 1.00:1.00 consolidated EBITDAR to consolidated fixed charges ratio under certain conditions.

Sentiment

Score: 7

Explanation: The document is neutral in tone, detailing a financial agreement. The amendment and restatement of the ABL Facility is a positive sign of continued financial stability and access to capital, but the covenants and restrictions also indicate potential constraints.

Positives

• The amendment and restatement of the ABL Facility provides continued access to liquidity for Bath & Body Works.
• The borrowing base calculation allows for flexibility in utilizing various asset types to support borrowing capacity.
• The interest rate margin is tied to excess availability, potentially reducing borrowing costs when the company performs well.
• The inclusion of eligible real property in the borrowing base can increase borrowing capacity.

Negatives

• The maturity date can be shortened if specific financial conditions related to senior notes are not met.
• The financial maintenance covenant requires maintaining a specific EBITDAR to fixed charges ratio under certain conditions, which could restrict financial flexibility.
• The borrowing base calculation is subject to customary eligibility criteria and reserves established by the collateral agent, which can reduce borrowing capacity.

Risks

• A decrease in excess availability below $200 million, combined with a low EBITDAR to fixed charges ratio, could trigger a reduction in the maturity date.
• Failure to maintain the required EBITDAR to fixed charges ratio during a specified event of default or low excess availability period could result in covenant breaches.
• Changes in eligibility criteria or increases in reserves by the collateral agent could reduce the borrowing base and limit borrowing capacity.
• The company's ability to incur debt or grant liens is restricted by covenants in the ABL Facility.

Future Outlook

The document does not contain explicit forward-looking statements but implies continued access to capital for Bath & Body Works through the amended ABL Facility.

Industry Context

This announcement is typical for retail companies that rely on asset-based lending to manage working capital and liquidity. The amendment and restatement reflect ongoing financial management and adaptation to market conditions.

Comparison to Industry Standards

• Comparable companies in the retail sector, such as Abercrombie & Fitch, typically utilize similar asset-based revolving credit facilities.
• The borrowing base calculation and financial covenants are standard features in ABL facilities, providing lenders with security and borrowers with access to capital.
• The interest rate margins and fees are within the typical range for ABL facilities of this size and risk profile.
• The inclusion of real property in the borrowing base is less common but can be beneficial for companies with significant real estate holdings.

Stakeholder Impact

• Shareholders: Continued access to capital can support the company's operations and growth.
• Employees: Financial stability can provide job security.
• Customers: Reliable operations can ensure product availability and service.
• Suppliers: Stable financial condition can ensure timely payments.
• Creditors: The ABL Facility provides a secured source of funding.

Next Steps

• Bath & Body Works will continue to manage its borrowing base and comply with the covenants in the ABL Facility.
• The collateral agent will monitor the company's financial performance and asset values to ensure compliance with the borrowing base requirements.
• The lenders will receive regular reports and updates on the company's financial condition and compliance with the ABL Facility.

Key Dates

Keywords

ABL Facility, revolving credit, borrowing base, EBITDAR, SOFR, CORRA, credit facility, Bath & Body Works, liquidity, financing