Bullish indicating open at $55-$60, IPO prices at $37
Starbucks Corporation (NASDAQ:SBUX), currently valued at $106.32 billion by market capitalization, has entered into a new $3.0 billion revolving credit facility, set to mature on June 13, 2030. According to InvestingPro analysis, the company operates with a moderate level of debt, with total obligations of $26 billion. The agreement, secured on Sunday, involves major financial institutions such as Bank of America, Citibank, and Wells Fargo (NYSE:WFC) among others as lenders, with Bank of America serving as the Administrative Agent.
The credit facility allows Starbucks to borrow up to $3.0 billion, with an option to request an increase of up to $1.0 billion from the lenders. It includes a $150 million sublimit for issuing letters of credit and carries an interest rate based on the Term Secured Overnight Financing Rate (Term SOFR) plus an applicable rate determined by Starbucks’ credit ratings. InvestingPro data shows the company’s current ratio of 0.64 indicates its short-term obligations exceed liquid assets, making this credit facility strategically important.
Starbucks is required to maintain a minimum fixed charge coverage ratio of 2.50 to 1 and the agreement includes standard events of default with certain cure periods. In case of default, lenders may demand immediate payment of outstanding amounts.
This new credit facility replaces the previous agreement dated September 16, 2021, which was terminated in conjunction with the establishment of the new arrangement.
The credit agreement contains standard covenants and events of default, including requirements for the company to maintain certain financial ratios. The lenders involved have previously engaged in commercial and investment banking transactions with Starbucks and may continue to do so.
The information in this article is based on a press release statement. For comprehensive analysis including 10 additional ProTips and detailed financial metrics, investors can access the full Starbucks research report on InvestingPro, part of their coverage of 1,400+ US stocks.
In other recent news, Starbucks has been the focus of several analyst reports and strategic announcements. RBC Capital has raised its price target for Starbucks to $100 from $95, citing the company’s accelerated labor deployment as a positive factor for potential top-line growth. Similarly, Citi has increased its price target to $95 from $84, noting promising signs in test markets for Starbucks’ Green Apron Service Model, which is expected to be fully rolled out by the end of summer. UBS also raised its price target to $95, pointing to strong brand affinity despite challenges in the U.S. market.
TD Cowen maintained a $90 price target, analyzing the potential earnings impact of Starbucks’ labor model changes, including the addition of assistant managers. Starbucks plans to introduce a generative AI assistant in 35 locations, aiming to improve service speed and simplify operations. This technology, developed with Microsoft (NASDAQ:MSFT) Azure’s OpenAI platform, is part of Starbucks’ broader strategy to enhance customer service efficiency. These developments are part of Starbucks’ ongoing efforts to address declining value perceptions and improve sales performance. The company is actively implementing strategic initiatives to navigate current market conditions and improve its financial outlook.
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