Sunday, December 28, 2008

Jones Apparel Cuts Credit Line

Jones Apparel Group Inc. on Friday cut back its revolving credit facilities to $600 million from $1.25 billion to reflect its current financing needs. The stock through Wednesday was down 76% this year amid the slowdown in consumer spending, in particular for women's apparel firms like Jones. Jones reduced its $750 million credit line maturing in May 2010 to $600 million and terminated its $500 million line that was due to expire in June. The company didn't have any cash borrowings outstanding on the lines. Chief Financial Officer John T. McClain said Jones believed it was prudent to amend the credit facilities to allow "financial flexibility in the current uncertain economic environment." He added the company had a "significant" amount of cash on hand. The agreements were also amended to "provide Jones with greater flexibility," the company said without giving details. Fees and interest rates were increased to current market rates. Jones, along with other retailers and apparel makers, has been hurt by sharp drops in consumer confidence amid the global recession. Consumers have been cutting back their discretionary spending as they look to save money any way they can. The company's third-quarter net income tumbled 93% as sales fell amid its exit from moderate sportswear lines, the repositioning of its l.e.i brand and last year's sale of Barney's hurt results. Jones saw same-store sales rise at its retail outlets but decline rapidly at wholesale stores as department stores continue to suffer. --- CREDIT FACILITIES - Company 10Q, Q3 2008 (Oct) Prior to June 6, 2008, we had credit agreements with several lending institutions to borrow an aggregate principal amount of up to $1.75 billion under Senior Credit Facilities. These facilities, consisting of a $1.0 billion five-year revolving credit facility expiring in June 2009 and a $750.0 million five-year revolving credit facility expiring in June 2010, could be used for letters of credit or cash borrowings . On June 6, 2008, we amended these facilities. The terms and conditions of the credit facilities remain substantially unchanged, except for modification of the pricing provisions and certain covenants and reduction of the aggregate commitment under the $1.0 billion facility to $500.0 million. At October 4, 2008, $195.7 million of letters of credit were outstanding under the credit facility that expires in June 2009 and no amounts were outstanding under the credit facility that expires in June 2010. Borrowings under the Senior Credit Facilities may also be used for working capital and other general corporate purposes, including permitted acquisitions and stock repurchases. The amended Senior Credit Facilities are unsecured and require us to satisfy a minimum Interest Coverage Ratio, a maximum Covenant Debt to EBITDA Ratio and a minimum Asset Coverage Ratio (each as defined in the Restated Credit Agreements), and contain covenants limiting our ability to (1) incur debt and guaranty obligations, (2) incur liens, (3) make loans, advances, investments and acquisitions, (4) merge or liquidate, (5) sell or transfer assets, (6) pay dividends, repurchase shares, or make distributions to stockholders, and (7) engage in transactions with affiliates. At October 4, 2008, we were in compliance with all of our covenants. At October 4, 2008, we also had uncommitted unsecured lines of credit available for up to $106.6 million of letters of credit, under which an aggregate of $21.5 million was outstanding. At October 4, 2008, we also had a C$10.0 million unsecured line of credit in Canada, under which C$0.2 million of letters of credit were outstanding.

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