Mattel Wins Loan Concessions in Toys `R' Us Bankruptcy AftermathBy
Mattel Inc. won some concessions on its $1.6 billion credit line, just two days after Toys ‘R’ Us collapsed into a bankruptcy that reverberated through the retail industry.
The toy-maker removed a requirement it meet certain performance goals from the third fiscal quarter and widened a ratio allowing it to increase debt related to earnings from the quarter after that, according to a regulatory filing. It also tweaked a definition of earnings which effectively allows it to add back certain numbers that may ultimately boost profit.
The extra breathing room is a boon for the maker of Barbie and Hot Wheels toys, which is attempting to turn around its business after weaker sales and rising leverage prompted downgrades by both Fitch Ratings and S&P Global Ratings in July. Toys ‘R’ Us’s bankruptcy filing late Monday may hurt profits and cash flow at Mattel, which has about 10 percent of annual revenue exposed to the company, if it doesn’t collect payments fast enough, according to S&P, which said Tuesday the filing didn’t affect Mattel’s rating.
Mattel’s amendments to the loan include removing the consolidated debt-to-consolidated Ebitda ratio requirement for the third quarter, according to the filing dated September 20. It also increased consolidated-debt-to-consolidated Ebitda ratio requirements to 4.50 to 1.00 for the fourth quarter, and then to 4.25 to 1.00 for each quarter after. Mattel amended the Ebitda definition to add-back extraordinary, unusual, non-recurring, or one-time cash expenses, losses, and charges not to exceed $275 million.