Birkenstock (NYSE:BIRK) Holding plc (NYSE:BIRKENSTOCK) has been aggressively implementing its deleveraging strategy following its initial public offering (IPO) on the New York Stock Exchange. The company is utilizing the net proceeds from the IPO and its existing cash assets to address its substantial debt, an approach that is already yielding significant results.
Birkenstock announced an early repayment of $450 million on its USD Term Loan B and €100 million on its EUR Vendor Loan. These loans were originally taken out to finance the company's acquisition by L Catterton in April 2021. The early repayments have resulted in a considerable reduction in Birkenstock's total debt, which has dropped from about €1,840 million to approximately €1,314 million.
These repayments have exceeded the estimates set out in the company's IPO prospectus, a success attributed to robust operating results. This accomplishment has not only strengthened Birkenstock's balance sheet but has also enhanced its financial flexibility.
Since transitioning to a new capital structure in April 2021, Birkenstock has managed to lower its leverage ratio, defined as Total Net Debt-to-Adjusted EBITDA, from over 6x to under 2.5x. This improvement is due to a combination of debt repayments and growth in EBITDA.
Looking forward, Birkenstock remains committed to maintaining this positive trend. The company has set a target to get the leverage ratio under 2x within the next 18 months and aims for it to be below 1x in the long term. This commitment indicates Birkenstock's determination to continue bolstering its financial health and stability while paving a path for consistent growth.
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