Signet Jewelers Ltd (NYSE:SIG) Q4 2020 Earnings Conference Call - Final Transcript

Mar 26, 2020 • 08:30 am ET

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Signet Jewelers Ltd (NYSE:SIG) Q4 2020 Earnings Conference Call - Final Transcript

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Presentation
Executive
Joan Hilson

flexibility, we accessed an additional $900 million on our asset-based facility on March 19. As of the date of this drawdown, we had more than $1.2 billion in cash on hand and an additional $292 million available on this facility. The asset-based revolving credit facility is subject to a fixed charge coverage ratio. It's availability under the facility falls below 10% of the borrowing base or $100 million, whichever is higher. The most recently reported borrowing base under this facility is approximately $1.4 billion. Additionally, the senior unsecured notes due in 2024 are not subject to financial covenants.

Now I would like to briefly discuss our non-prime credit offering. In June of 2018, we entered into a five-year agreement under which CarVal Investors and Castlelake LP would purchase 70% and 30% respectively of our non-prime receivables related to our private label credit offering. These non-prime sales currently represent approximately 7% of Signet's annual sales in the prior year. As we disclosed in our December Form 10-Q, the net yield on these receivables have fallen below the minimum yield under the agreement which gave the investors the right to terminate the agreement as of December 31, 2019. As you will see in our 10-K filing, on March 23, 2020, CarVal provided notice to the company that it was terminating the agreement, effective the same day. In the notice of termination, CarVal stated that it is willing to provide a 30-day purchase facility at substantially the same terms as the terminated agreement, but for a fixed term of 30 days from March 23, 2020. Signet is in discussions with CarVal regarding such transition agreement. Castlelake has informed Signet that, subject to their reservation of right to terminate, they do not currently intend to terminate their agreement. On March 25, 2020, Castlelake and Signet entered into a non-binding memorandum of understanding regarding the parties' shared interest and a potential definitive agreement whereby Castlelake would purchase 100% of the funding obligations on the forward flow and add-on purchases on a go-forward basis.

Importantly, our servicing arrangement with our partner Genesis Financial remains in place. We believe that CarVal's termination will not have a material adverse impact on our Signet's financial condition and we'll provide an update on our partner arrangements when these discussions are completed.

Finally, I'd like to mention that we will not be providing fiscal or first quarter 2021 guidance due to the current uncertainty in the market. Be assured that our leadership team and team members at every level of our organization are resolutely focused on generating cash to maintain financial flexibility in this fluid environment. And now I'll turn the call over to the operator to begin the Q&A section.