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Valentino enters the bond market
Italian brand Valentino has approved the issuance of senior secured bonds in the amount of 450 million euros.
The placement of securities is planned to be completed by August. In this way, the company aims to raise funds directly from institutional investors, following a trend that has been actively used by other luxury goods manufacturers recently.
The funds will be used to repay bank loans
Valentino plans to use the raised financing primarily for the early repayment of existing bank credit lines.
Part of the funds will also be used to finance capital investments and replenish working capital, which should improve the company's financial flexibility.
The deterioration of the luxury goods market created financial pressure
The decision to issue bonds is related to the difficult situation in the world market of luxury goods.
Due to the slowdown in demand, Valentino's financial results deteriorated, which led to the violation of certain terms of credit agreements with banks. Previously, the company already had to negotiate with creditors on debt refinancing and attract additional capital from shareholders.
Shareholders are ready to support the company
An additional guarantee for investors will be the support of the brand owners - Kering and Mayhoola.
The shareholders have committed to invest up to 250 million euros of equity if needed if the company faces difficulties in servicing the new debt.
The bonds will have a floating rate and a long maturity
Valentino's new bonds, which were originally guaranteed by HSBC, will mature in 2033.
The interest rate will be floating and will be defined as the six-month Euribor plus a 3% margin. At the same time, the papers provide for an amortization structure, which means the beginning of partial repayment of the debt already two years after their issue.
Luxury brands are adapting to new market conditions
The issue of bonds indicates a change in approaches to financing among global manufacturers of luxury goods. Against the backdrop of slowing demand, companies are increasingly diversifying sources of capital and reducing dependence on bank lending.
For Valentino, this transaction should be an important step in strengthening financial stability and securing resources for further development.