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Tory Burch is tightening the reins on its ownership structure.<\/p>\n
The company plans to take out a $700 million term loan \u201cto refinance the company\u2019s existing loan facility and partially fund the possible buyout of General Atlantic,\u201d according to a spokesperson. Tory Burch is also taking on a new $300 million revolving credit facility.<\/p>\n
More from WWD<\/strong><\/p>\n The deal represents a turning of the page for both brand and backer.<\/p>\n General Atlantic bought into Tory Burch in 2012, when the designer\u2019s ex-husband Christopher Burch sold off much of his stake in the firm, wrapping up a nasty legal battle.<\/p>\n Borrowing to buyout is a move that the company has pulled off successfully before. Tory Burch used debt to buy out early investor Tresalia Capital in 2018, concentrating ownership of the business.<\/p>\n Assuming General Atlantic does exit, the company will be owned by BDT & MSD Partners, the designer and her family and other shareholders.<\/p>\n On Tuesday, Standard & Poor\u2019s detailed the proposed debt affirmed its BB-minus rating on the company with a stable outlook.<\/p>\n S&P pegged the price of General Atlantic\u2019s entire stake at $346 million and forecast that the company would be able to use cash to quickly pay down its new debt. The company is adding an incremental $127 million to fund part of the buyout.<\/p>\n \u201cWe estimate pro forma leverage will rise to 3.4-times and quickly decline below 3-times in fiscal 2027 as operating performance improves and debt is repaid,\u201d the rating agency said.<\/p>\n That improvement in leverage would be driven by both debt reduction and projected cash flow from operations of $150 million or more, S&P said.<\/p>\n \u201cPro forma for the transaction, the company will have approximately $121 million of cash on hand and full availability under its new $300 million revolving credit facility due 2031,\u201d S&P said. \u201cThis represents a $100 million increase in borrowing capacity relative to its prior $200 million revolver due 2030.\u201d<\/p>\n S&P expects the company will see free operating cash flow of about $94 million this year, after capital expenditures of roughly $80 million.<\/p>\n That spending is seen going into international stores, a refresh of the existing retail base and technology initiatives, according to S&P.<\/p>\n \u201cWe expect Tory Burch to return to modest revenue growth in fiscal 2026 following pressured performance in fiscal 2025,\u201d the debt watchdog said. \u201cConsolidated revenue declined approximately 3.5 percent year over year for the fiscal 2025 \u2014 approximately 1.5 percent when adjusting for the 53rd fiscal week in 2024 \u2014 reflecting continued softening demand across certain luxury categories and weaker discretionary consumer spending.\u201d<\/p>\n<\/p><\/div>\n That included a 3 percent drop in the Americas, with a 2 percent decline in the direct-to-consumer channel and a 10 percent decline in wholesale.<\/p>\n S&P is looking for Tory Burch to post revenues of 3.1 percent this year and 3.4 percent in 2027 as it \u201cexpands internationally within Asia and Europe, improves pricing for new product launches \u2014 including passing through tariff-related cost \u2014 and shifts further from wholesale, which currently represents about 17.5 percent of total revenue.\u201d<\/p>\n S&P-adjusted margins on earnings before interest, taxes, depreciation and amortization are expected to rise to 20.4 percent this year, up from 19.9 percent last year, \u201csupported by disciplined expense management, tariff mitigation, and strategic pricing actions.\u201d<\/p>\n