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Gap to sell 1.5 billion dollar bond

By Kristopher Fraser

Sep 15, 2021


Image: Gap Inc.

Bloomberg has reported that Gap Inc. will be selling a 1.5-billion-dollar junk sale bond to buy back the debt raised throughout the peak of the COVID-19 pandemic last year. This will cut Gap’s borrowing costs as they work on rebounding after taking a hit from COVID-19 lockdowns.

The new note is split into two, and people familiar with the matter have said that early pricing discussions are for a low-4 percent yield for the eight-year trance, and 25 basis points more for the ten-year part. Each note will be offered at a price of 100 percent of the original principal thereof.

The notes will be guaranteed on a senior unsecured basis, jointly and severally, by each of our existing wholly owned domestic subsidiaries that is a borrower or guarantor under our existing ABL Credit Agreement. The closing of the offering of the notes is expected to occur on or about September 27, subject to the satisfaction of customary closing conditions.

Gap Inc. says they intend to use the net proceeds from the sale of the notes, together with cash on hand, to purchase all of their outstanding 8.375 percent senior secured notes due 2023, 8.625 percent senior secured notes due 2025 and 8.875 percent senior secured notes due 2027 that are accepted for purchase pursuant to tender offers and consent solicitations announced by Gap Inc. on September 13. To the extent that less than the full amount of existing secured notes is purchased in the tender offers, they expect to retire any remaining existing secured notes through one or more tender offers, open market purchases or redemptions.

The deal will be led by Citigroup Inc. Gap is in a similar position to companies like Carnival Corp. and Delta Air Lines Inc. who bought back expensive debt raised at the start of the COVID-19 pandemic.