Signet Taps Credit Facility as Stores Close

Signet Jewelers has tapped its rainy-day fund, now that it’s confronted by a monsoon.

On Monday, America’s largest jeweler said it would access an additional $900 million from its senior secured asset-based revolving credit facility.

The announcement came after Signet said that it would temporarily close all of its North American stores because of the spread of COVID-19. Its two U.K. chains—Ernest Jones and H.Samuel—shut the following day after Prime Minister Boris Johnson mandated the closing of all nonessential businesses.

Signet called the decision to tap the facility “a prudent measure to increase Signet’s financial flexibility and bolster its cash position.” It has more than $1.2 billion in cash on hand, as well as an additional $292 million available in the asset-based revolving credit facility, it said.

Industry analyst Paul Zimnisky said that Signet isn’t the only big retailer looking for more liquidity in the current environment.

“No one knows how long stores will have to be closed,” he says. “In the meantime, expenses keep accruing.”

He notes that, on Friday Macy’s accessed $1.5 billion from its credit facility—a higher amount than Signet.

Signet also said that it plans to “aggressively” reduce capital expenditures and operating expenses and focus on inventory discipline. The cost-cutting measures will include slashing work hours, furloughing workers, and lowering pay for its store and support center teams, as well as its executives and the board of directors.

The asset-based revolving credit facility is subject to a fixed-charge coverage ratio if availability under the facility falls below 10% of the borrowing base, or $100 million, whichever is higher.

Due to the uncertainty caused by the spread of COVID-19, Signet said it will not provide guidance for its first quarter or the full year fiscal 2020.

At the time of publication. Signet’s stock was trading at $6.60 a share.

(Image courtesy of Signet Jewelers)

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