HAMILTON, Bermuda--(BUSINESS WIRE)--
Signet Jewelers Limited (“Signet”) (NYSE:SIG), the world’s largest
retailer of diamond jewelry, exercised its option to appoint a minority
purchaser under its non-prime receivables purchase agreement with
investment funds managed by CarVal Investors (“CarVal agreement”), which
was announced on March 14, 2018.
This agreement diversifies Signet’s non-prime receivables funding
partnership and supports the company’s transition to a fully outsourced
credit structure which maintains a full spectrum of category-leading
financing and lease options for consumers.
Castlelake, L.P., a global alternative investment firm with significant
specialty finance expertise, has been selected as the minority
purchaser. At closing, investment funds managed by CarVal Investors will
purchase the non-prime receivables arising from 70 percent of Signet’s
existing accounts and funds managed by Castlelake will purchase the
remaining 30 percent. Funds managed by Castlelake will purchase the
receivables under substantially the same terms as the CarVal agreement.
In addition, Castlelake, on behalf of funds it manages, entered into a
five-year forward flow purchase agreement in which it is obligated to
purchase forward flow receivables arising from 30 percent of Signet’s
non-prime accounts at the same discount rate as agreed under the CarVal
agreement. Investment funds managed by CarVal Investors will purchase 70
percent of the forward flow non-prime receivables.
The closing of the transaction with Castlelake and CarVal will occur
simultaneously. The Company continues to expect the non-prime credit
outsourcing transaction to close in the second quarter of Fiscal 2019
subject to certain closing conditions. Expected proceeds from the sale
remain unchanged at $401 million to $435 million inclusive of servicing
expenses on the receivables before transaction costs of $7 million.
The completion of the outsourcing of Signet’s credit portfolio is
expected to significantly reduce consumer credit risk from the balance
sheet, reduce working capital and allow the Company to return
significant capital to shareholders. It also allows the company to
increase strategic and operational focus on its core jewelry retail
business as it proceeds to execute the Signet Path to Brilliance
transformation plan.
Signet’s guidance provided on March 14, 2018 and April 2, 2018 relating
to the impact of the credit transaction is unchanged and is reiterated
below for reference:
-
In the second month of the first quarter of Fiscal 2019, the non-prime
receivables were reclassified to assets held for sale and will be
carried at fair value until they are sold to investment funds managed
by CarVal and Castlelake.
-
The total pre-tax loss associated with the sale of the non-prime
receivables is expected to be $165 million to $170 million inclusive
of an estimated $7 million in transaction costs, of which $140 million
is expected to be recognized in the first quarter of Fiscal 2019 upon
the reclassification of receivables as assets held for sale.
-
Signet continues to expect the outsourcing of both prime and non-prime
receivables to result in an estimated unfavorable year over year
operating income impact of $118 million to $133 million for the full
year Fiscal 2019 with $60 million of this impact occurring in the
first quarter of Fiscal 2019.
-
The Company continues to expect $475 million in share repurchases in
Fiscal 2019 funded by proceeds from its non-prime credit transaction
and cash on hand.
For additional information, please see Signet’s Current Report on Form
8-K filed today with the SEC and Signet’s Current Report relating to the
credit transaction on Form 8-K filed March 14, 2018.
Goldman, Sachs & Co. is serving as financial advisor and Simpson Thacher
& Bartlett LLP is serving as legal advisor to Signet Jewelers. Sidley
Austin LLP served as legal advisor to Castlelake.
About Signet
Signet Jewelers Limited is the world's largest retailer of diamond
jewelry. Signet operates over 3,500 stores primarily under the name
brands of Kay Jewelers, Zales, Jared The Galleria Of Jewelry, H.Samuel,
Ernest Jones, Peoples, Piercing Pagoda, and JamesAllen.com. Further
information on Signet is available at www.signetjewelers.com.
See also www.kay.com,
www.zales.com,
www.jared.com,
www.hsamuel.co.uk,
www.ernestjones.co.uk,
www.peoplesjewellers.com,
www.pagoda.com,
and www.jamesallen.com.
About Castlelake
Castlelake, L.P. is a global private investment firm focused on
investments in specialty finance, dislocated industries, special
situations and other alternative assets, and is an experienced leader in
commercial aviation ownership and servicing. With primary offices in
Minneapolis and London, the Castlelake team comprises more than 130
professionals. As of December 31, 2017, Castlelake manages private funds
and debt vehicles with approximately $13.1 billion in assets, on behalf
of its investors, including endowments, foundations, public and private
pension plans, private funds, family offices, insurance companies and
sovereign wealth funds. For more information, visit www.castlelake.com.
Signet Safe Harbor
This release contains statements which are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of
1995. These statements, based upon management’s beliefs and expectations
as well as on assumptions made by and data currently available to
management, appear in a number of places throughout this document and
include statements regarding, among other things, Signet’s results of
operation, financial condition, liquidity, prospects, growth, strategies
and the industry in which Signet operates. The use of the words
“expects,” “intends,” “anticipates,” “estimates,” “predicts,”
“believes,” “should,” “potential,” “may,” “forecast,” “objective,”
“plan,” or “target,” and other similar expressions are intended to
identify forward-looking statements. These forward-looking statements
are not guarantees of future performance and are subject to a number of
risks and uncertainties, including but not limited to, our ability to
implement Signet's transformation initiative, the effect of federal tax
reform and adjustments relating to such impact on the completion of our
quarterly and year-end financial statements, changes in interpretation
or assumptions, and/or updated regulatory guidance regarding the U.S.
tax reform, the benefits and outsourcing of the credit portfolio sale
including I/T disruptions, future financial results and operating
results, the timing and expected completion of the second phase of the
credit outsourcing, the impact of weather-related incidents on Signet’s
business, the benefits and integration of R2Net, general economic
conditions, potential regulatory changes or other developments following
the United Kingdom’s announced intention to negotiate a formal exit from
the European Union, a decline in consumer spending, the merchandising,
pricing and inventory policies followed by Signet, the reputation of
Signet and its brands, the level of competition in the jewelry sector,
the cost and availability of diamonds, gold and other precious metals,
regulations relating to customer credit, seasonality of Signet’s
business, financial market risks, deterioration in customers’ financial
condition, exchange rate fluctuations, changes in Signet’s credit
rating, changes in consumer attitudes regarding jewelry, management of
social, ethical and environmental risks, the development and maintenance
of Signet’s omni-channel retailing, security breaches and other
disruptions to Signet’s information technology infrastructure and
databases, inadequacy in and disruptions to internal controls and
systems, changes in assumptions used in making accounting estimates
relating to items such as extended service plans and pensions, risks
related to Signet being a Bermuda corporation, the impact of the
acquisition of Zale Corporation on relationships, including with
employees, suppliers, customers and competitors, and our ability to
successfully integrate Zale Corporation’s operations and to realize
synergies from the transaction.
For a discussion of these and other risks and uncertainties which could
cause actual results to differ materially from those expressed in any
forward-looking statement, see the "Risk Factors" section of Signet's
Fiscal 2018 Annual Report on Form 10-K filed with the SEC on April 2,
2018 and quarterly reports on Form 10-Q filed with the SEC. Signet
undertakes no obligation to update or revise any forward-looking
statements to reflect subsequent events or circumstances, except as
required by law.
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Source: Signet Jewelers Limited