On the heels of a Moody’s Investors Service downgrade in the debt ratings of VF Corporation, the active lifestyle company has priced €500 million aggregate principal amount of unsecured senior notes due 2026 at 99.704 percent of the aggregate principal amount with a coupon of 4.125 percent and €500 million aggregate principal amount of unsecured senior notes due 2029 at 99.570 percent of the aggregate principal amount with a coupon of 4.250 percent. The sale of the 2026 and 2029 Notes was underwritten by J.P. Morgan, Morgan Stanley, Barclays and Goldman Sachs & Co., LLC as representatives of several underwriters.

The VFC offering of the 2026 and 2029 Notes is expected to close on March 7, 2023, subject to customary closing conditions.

Moody’s said the downgrade was due to the company’s currently high leverage resulting from underperformance in its Vans brand, as well as large customer inventory de-stocking at Dickies, a slower-than-expected recovery in China and elevated inventory levels that are leading to higher promotional sales activity and reduced margins.

Moody’s noted that VF has a debt/EBITDA of 4.2x for the twelve months ended December 31, 2022.

VFC said it intends to use the net proceeds from the offering for general corporate purposes, including the repayment of borrowings under our commercial paper program.

The company intends to use an amount equivalent to the net proceeds from the sale of the 2029 Notes to finance, in whole or in part, one or more Eligible Projects designed to contribute to selected Sustainable Development Goals as defined by the United Nations. These Eligible Projects include new, existing and prior investments made by the company during the period from two years before the date of issuance of the 2029 Notes through the maturity date of the Notes, including the following categories:

  • Investments in, or expenditures on, identifying and/or developing innovative and more sustainable materials and/or sustainable packaging solutions;
  • Investments in, or expenditures on, the acquisition, development, construction and/or installation of, renewable energy production units or energy storage units;
  • Investments in projects to improve energy efficiency and/or reduce the greenhouse gas footprint of our operations and supply chain;
  • Investments in sustainable building design features and in buildings that receive a third-party verified certification of Leadership in Energy and Environmental Design (LEED) Platinum, LEED Gold, or Building Research Establishment Environmental Assessment Method (BREEAM) rating of very good or higher;
  • Investments to achieve the zero-waste status for all the company’s distribution centers, with zero-waste defined as a site that diverts 95 percent or more of its waste away from disposal through recycling, composting and reuse;
  • Upgrade costs for improvement of wastewater quality across the supply chain; and
  • Investments in “natural carbon sinks,” which are designed to create and restore natural sources of carbon capture, such as reforestation conservation projects, and investments in regenerative farming, grazing and ranching practices.

The company plans to publish annual updates on the net proceeds of the 2029 Notes, including, subject to any confidentiality considerations, descriptions of selected projects funded with such proceeds, and to the extent possible, their environmental impacts. These updates will be reported publicly on the Sustainability & Responsibility section of its website starting one year from the date hereof and during the term of the 2029 Notes until the company has allocated an amount equivalent to the net proceeds from the sale of the 2029 Notes to finance, in whole or in part, one or more eligible projects.