USA: Warnaco Receives Refinancing Approval From Lenders
The company said that the closing of the new facility agreements, which is expected to be completed by October 6, 2000, remains subject only to customary closing conditions including the execution of final documentation.
As part of the agreements reached with the lender groups approving the financing transactions, Warnaco said that it agreed to reduce overall lender commitments to $2.56bn from $2.9bn, which the company said it expects will provide sufficient working capital liquidity going forward, and to suspend future cash dividends on Warnaco's common stock. Warnaco expects to complete the payment of the previously declared cash dividend of $0.09 per share of common stock payable on October 5, 2000 to holders of record as of September 6, 2000.
The company said it also received a limited waiver of compliance with financial covenants in certain of its existing debt facilities in order to facilitate completion of the financing transactions by October 6, 2000. Warnaco said that upon satisfaction of the closing conditions to and completion of the planned transactions, the company will have no material debt maturing prior to August 2002. The amended financing facilities will be secured by assets owned by Warnaco and its subsidiaries.
Warnaco said that it anticipates taking an after-tax charge in the third quarter of 2000 of approximately $50m to $60m in connection with additional operating initiatives being implemented. These initiatives are expected to create annualised cost savings of $50m through additional workforce reductions, inventory clearance and facility consolidations.
Commenting on its revised outlook for Warnaco's 2000 fiscal year, the company said that it now expects to report an operating loss, before charges and investment gains, in the range of $0.25 to $0.30 per diluted share for the 2000 fiscal year and in the range of $0.45 to $0.50 per diluted share for the third quarter of the 2000 fiscal year. The revised outlook takes into account reduced revenues from sales to retailers as a result of the difficult business environment affecting the apparel industry in general, increased interest expense upon completion of the financing transactions, and additional markdowns in connection with further inventory reductions. Warnaco said that it will announce actual results for the third quarter of 2000 on or about November 2, 2000 as previously scheduled.
Linda Wachner, chairman and chief executive officer of Warnaco, said: "Our new financing agreements, which have now been approved by all of the members of our lender groups and which we expect to complete next week, together with the operational initiatives that we have been implementing and expanding over the last several months, provide a foundation for the company's future performance. We expect that our earlier global operating initiatives program and the additional operating initiatives that we are presently implementing should result in substantial improvement in operating earnings and Warnaco returning to profitability in 2001.
"The very difficult business environment facing the apparel industry generally for the remainder of this year and Warnaco's present and anticipated near-term financial performance underscore the prudence of our agreement with our lenders to suspend future common stock dividends at this time. We are fully engaged and committed to achieving enhanced financial performance, building the long-term business enterprise value of our Company and reinstating the common stock dividend when appropriate in the future."
Warnaco said that the revised bank commitment letter from its lead lenders and the limited waivers will be filed on Form 8-K with the Securities and Exchange Commission.
About Warnaco Group
The Warnaco Group, Inc, based in New York, is a manufacturer of intimate apparel, menswear, jeanswear, swimwear, men's and women's sportswear, better dresses, fragrances and accessories.
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