Arts and crafts retailer Michaels’ Stores, jointly owned by private equity giants The Blackstone Group and Bain Capital, has drawn down $120 million from its senior secured revolving credit facility as a result of severe credit market dislocations.
The Texas-based company said that it “took this proactive step to ensure that it had adequate liquidity to meet its cash needs while there are disruptions in the debt markets”, according to a filing from the Securities and Exchange Commission.
Michaels also said that it will use the fresh funds, drawn down 19 September from a $1 billion asset-based credit facility extended by Banc of America, to support seasonal working capital needs, as well as semi-annual interest payments associated with the company’s 10 percent senior notes due 2014 and 11 3/8 percent senior subordinated notes due 2016.
Michaels’ has posted a 1 percent gain in total sales and a 2.8 percent loss in same-store sales year to date, according to a sales history from the company’s website. As of last month, the company had 996 stores.
New York-based Blackstone partnered with Boston-based Bain to take Michaels’ private in July 2006 for $6 billion, paying a 30 percent premium on the company’s share price on 20 March, the day before the company announced that it was to undertake a strategic review. That same day, Blackstone also invested $870 million in orthopedic device manufacturer Encore and $4.3 billion in cash to divest travel company Travelport from its listed parent, Cendant.
Businesses across the country have drawn down revolving credit facilities in recent months either to address immediate financial concerns or to position themselves against future disruptions in the credit markets.
An analyst report from banking giant Deutsche Banks issued earlier this week stated that the bank was “encouraged by the improved liquidity profile at Michaels Stores”, even after the “prudent” draw down on the revolving credit line.
Blackstone declined to comment.