Following its initial public offering on the New York Stock Exchange, Birkenstock Holding plc reported it is moving forward with its deleveraging program and is utilizing the net proceeds from the IPO, together with cash on hand, to repay existing debt.
The company made an early repayment of $450 million on its U.S. dollar Term Loan B and €100 million on its euro Vendor Loan. Both loans were solely issued to finance the acquisition of Birkenstock by L Catterton in April 2021. The company said it is “running a profitable and cash-rich business and pursues a very conservative financial policy as evidenced by the evolution of operating cash flow.”
As a result of the prepayment, Birkenstock has reduced its total debt from approximately €1.84 billion to approximately €1.31 billion.
Birkenstock said the aggregate amount of the early loan repayments is significantly higher than envisaged in the IPO prospectus reflecting the company’s continued excellent operating results. The early loan repayments is said to strengthen the company’s balance sheet while achieving additional financial flexibility.
“With a leverage ratio that is in line with industry benchmarks Birkenstock is well positioned to continue on its strong growth trajectory,” the company said in a release.
Since entering into the new capital structure in April 2021, Birkenstock said it has reduced its leverage (Total Net Debt-to-Adjusted EBITDA ratio) from above 6x to below 2.5x through repaying debt and growing EBITDA. Birkenstock said it plans to continue its deleveraging process and aims to achieve a leverage ratio of below 2x within the next 18 months. Long-term, the Company expects to achieve a leverage ratio of below 1x.
On November 2, 2023, at the end of the current interest period, Birkenstock made an early partial repayment of $450 million on its U.S. dollar Term Loan B, resulting in an outstanding balance of $331 million. On October 16, 2023, the company completed an early partial repayment of €100 million on the euro Vendor Loan, leaving an outstanding balance of €200 million.
The €200 million ABL revolving credit facility reportedly remains fully undrawn and therefore available in its entirety to Birkenstock. The early payments are said to reflect the company’s strong liquidity position and underscore its strong financial performance, commitment to prudent capital management, and the ability and ambition to invest in key growth areas by unlocking white-space growth opportunities over the long term.
Oliver Reichert, director of Birkenstock Holding plc and CEO of the Birkenstock Group, said, “It’s as simple as this: We don’t like to be in debt, and we don’t need to because we run a profitable and cash-rich business. Taking this important step of early repayments emphasizes our commitment to debt reduction as outlined in our IPO prospectus. Additionally, the early repayments will result in incremental interest savings of more than EUR 40 million per year. Our robust operating cash flow allows internal financing of investments, aligning with our dedication to financial resilience and creating enduring shareholder value through disciplined financial planning.”
Photo courtesy Birkenstock
