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Buckhead baby clothier sells $500 million in notes to secure finances amid pandemic

By David Pendered

Carter’s, the Buckhead-based clothier for babies and children, has sold $500 million in senior unsecured notes that are to help the company comply with debt covenants, according to corporate financial reports.

carter's, buckhead office, highrise

Carter’s has sold $500 million in senior unsecured notes to help position the company’s finances through the economic slowdown related to COVID-19, corporate filings show. Credit: David Pendered

The company had about $1 million in future borrowing capacity, and debt of $749 million, in late March, according to a quarterly report Carters’ filed May 6 with the U.S. Securities and Exchange Commission.

The company reported that it was in compliance with its covenants as of March 28. However, the company’s business forecasts – in light of COVID-19 impacts – indicated the company would not be in compliance with its covenants in the second, third and fourth quarters of 2020, according to the report.

Carter’s Inc. is among many domestic companies that have taken steps to protect their access to cash, and reposition debt, during the pandemic-related economic downturn. Some companies anticipated a downturn during the presidential election cycle began restructuring their finances in late 2019. Georgia Pacific, another Atlanta-based company, has taken steps to sell about $2 billion in unsecured notes.

This snapshot of Carter’s financial situation emerges from its quarterly report:

  • March 28 – The company had access to about $1 million in future borrowing;
  • March 28 – The report states: “The company had $744 million in outstanding borrowings under its secured revolving credit facility, exclusive of $5.0 million of outstanding letters of credit.” This included $639 million the company had drawn previously in March, from its secured revolving credit facility, in order to, “improve near-term liquidity in light of the uncertainty and disruption related to COVID-19….”
  • May 5 – The company amended its revolving credit facility to include a waiver of covenants through 2020 and an revision of credit facilities through the third quarter of 2021. Terms of the revision were not specified.
  • May 5 – In addition to the credit revisions, the company arranged the ability to raise unsecured financing – the $500 million in unsecured notes.
  • May 6 – The company delivered its final offering memorandum to the purchasers, whose identities are not disclosed but who are deemed to be sophisticated investors who understand risk.
  • May 11 – The sale of $500 million in notes is completed.

The $500 million in notes are due in 2025 and pay a rate of 5.5 percent. After fees and expenses, the company received $493.2 million, according to a subsequent report of the sale filed with the U.S. Securities and Exchange Commission.

Moody’s Investors Service on May 6 rated the debt as investment grade, when the amount under consideration was $400 million. Analysts awarded the debt a stable outlook, given the company’s market position and consumers’ ongoing need to replenish clothing for babies and children.

Carter’s intends to use $250 million to repay some of the money borrowed under its secured revolving credit facility, according to the company’s May 11 notice of the sale to the SEC. The remaining money is to be used for, “general corporate purposes,” the statement observed.

Owners of the notes can redeem them starting May 15, 2022. The company may redeem up to 40 percent of the issuance on or before the same date, according to the report.

Carter’s no longer is required to provide public benefits to Atlanta under terms of its 2012 agreement with Invest Atlanta, the city’s development arm. The agreement ended in Dec. 31, 2017, according to terms of the initial contract.

Carter’s was to guarantee it would create 200 jobs – paying a certain scale and insurance – as part of the deal for a $350,000 Economic Opportunity Fund grant from Invest Atlanta.

The overall incentive package provided to Carter’s to bring them to the state included at least $30 million from sources that included one unnamed entity and the State of Georgia, according to the Invest Atlanta documents.

David Pendered

David Pendered, Managing Editor, is an Atlanta journalist with more than 30 years experience reporting on the region’s urban affairs, from Atlanta City Hall to the state Capitol. Since 2008, he has written for print and digital publications, and advised on media and governmental affairs. Previously, he spent more than 26 years with The Atlanta Journal-Constitution and won awards for his coverage of schools and urban development. David graduated from North Carolina State University and was a Western Knight Center Fellow.


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