German sandal maker, Birkenstock Holding Plc (Ticker: BIRK), has announced that it has utilized the funds raised from its recent initial public offering (IPO) to repay loans, resulting in a reduction of its leverage to 2.5 times. The company is now committed to maintaining a long-term leverage ratio target of below 1.0 times.
Early Loan Repayment
Birkenstock has successfully repaid a significant portion of its debt, including $450 million of its dollar-denominated Term B loan and 100 million euros of its euro-denominated vendor loan. These loans were originally taken to finance the acquisition of a majority stake in the company by L Catterton, an investment firm formed through a partnership between Catterton, LVMH, and Groupe Arnault.
Decreased Debt
As a result of the early repayments, Birkenstock's debt has been significantly reduced from EUR1.840 billion to EUR1.314 billion, surpassing the expectations outlined in its IPO filing documents.
Positive Market Reaction
Since the announcement, Birkenstock's stock has seen a 4% increase and is currently trading at $40.14. However, it is important to note that the current trading price remains below the IPO issue price of $46.
Birkenstock's strategic move to repay its loans early demonstrates the company's commitment to reducing leverage and improving financial stability.
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