Douglas has successfully agreed on a comprehensive refinancing package of €2.55 billion, providing a strong financial position for the next five years.
The financing package comprises a €600 million senior secured term loan, €1,305 million of senior secured notes, €475 million of senior PIK notes, and a €170 million revolving credit line. Douglas’s shareholders—the financial investor CVC and the Kreke family—have also underscored their commitment and continued support to the company by providing an additional €220 million of equity funding.
“We placed our entire financing structure on a solid and long-term foundation at an early stage,” CEO Tina Müller said. “Institutional investors and our owners are well aware of our operating performance as a digital enterprise with brick-and-mortar business. Douglas will consistently expand its potential as Europe’s leading beauty platform and continue to interlink its e-commerce and in-store operations. The new financing package will give Douglas more leeway to conduct its operative business and for strategic initiatives.”
The refinancing is expected to close on April 8 and the existing debt financing will be repaid in full at that time, in addition to ~€100 million of additional cash reserves being funded to the company’s balance sheet.
Douglas started the fiscal year 2020/21 with record growth in e-commerce, generating online sales growth of 74 percent to €433 million. In spite of the lockdowns across Europe, the Douglas Group generated sales of €1.2 billion in the first quarter, a decrease of only 7.1 percent (like-for-like) compared to the corresponding period in the previous year, in a market that was more than challenging. In Germany, sales were stable with a decline of only 3.3 percent (like-for-like).
The Experts Speak:
“If the market is supportive of a name like Douglas then it may pave the way for other similar companies to do the same, so we could potentially see more aggressive deals come to market in the coming months,” Jeff Mueller, Eaton Vance’s Co-Director of High-Yield Bonds, told Bloomberg.
“As much as European leveraged finance conditions could be described as an issuer’s market right now, rising case counts and extended lockdowns in Germany, France and Italy in recent days should not be overlooked,” said Neill Keaney, a credit analyst at CreditSights in London.
“The PIKs are much riskier, but at 9% you have a lot of income to accrue while watching the story play out,” Mark Benbow, a fund manager at Aegon Asset Management in Edinburgh, told Bloomberg. “Importantly, for those there is no imminent risk of default now that they have managed to refinance the shorter-dated bond.”
“We have more conviction in the secured notes, the PIK is definitely one that could be volatile,” he said.
“I would have expected a double-digit coupon given its junior ranking in the capital structure, but the market is hunting for yield,” said Solweig Pierronnet, Senior Credit Analyst at Spread Research in Lyon, France.
“Investors usually don’t like to price the future, but that’s a reflection of the current environment,” Spread’s Pierronnet said.
One comfort for investors: the company plans to go public in the next few years, which means it could start reducing its debt burden to prepare for a listing, said Aegon’s Benbow.
