Burlington Stores, a nationally recognized off-price retailer of high-quality, branded apparel at everyday low prices, announced the launch of a debt refinancing transaction and provided updated comparable store sales guidance for the second quarter ending August 2, 2014.
The Company is seeking commitments from lenders under a new senior secured credit facility for an aggregate principal amount of $1.2 billion and currently expects the new senior secured credit facility to comprise a single tranche of term loans maturing in 2021. In addition, the Company is renewing its current ABL facility for an additional five years and expects to benefit from current market pricing.
Based on the Company's results quarter to date and its estimates for the remainder of July, comparable store sales for the second fiscal quarter of 2014 are expected to increase between 3% and 4%, which follows last year's second quarter comparable stores sales increase of 7.8%. This compares to the Company's previous comparable store sales guidance for the second quarter of 2% to 3%. For the full year, the Company expects operating margin rates consistent with previous guidance, including an increase in Adjusted EBITDA margin rate of 10 to 20 basis points, as compared to the prior fiscal year.
The net proceeds of the new senior secured credit facility, together with borrowings of approximately $217 million under the company's ABL Facility, will be used to repay all indebtedness outstanding under the existing term loan B facility (4.25%), to redeem the 9.00%/9.75% Senior Notes due 2018 (the "2018 Notes") and 10% Senior Notes due 2019 (the "2019 Notes") and to pay related fees and expenses. The Company estimates that if the refinancing transaction had been consummated February 2, 2014, the first day of the fiscal year, at the indicative pricing of 3.0% to 3.25% plus a 1% LIBOR floor, it would have realized annual interest expense savings of $34 million to $38 million, depending on the final pricing. This would have resulted in an increase to fully diluted adjusted earnings per share of 27 cents to 30 cents for the full year. These interest expense savings estimates are net of the potential impact of the costs of hedges, which may be entered into to limit interest rate risk.
The company estimates that for the second half of fiscal 2014 this transaction will reduce interest expense by $16 million to $18 million and increase fully diluted adjusted earnings per share by 13 cents to 14 cents, net of potential hedging costs. These assumptions are dependent upon final pricing, and closing and funding the transaction on or about August 13, 2014. As a result of this transaction, the Company expects to incur a Loss on Extinguishment of Debt of approximately $75 million, subject to completion of final accounting procedures. Included in the estimated interest expense savings is the amortization of approximately $15 million in expenses in connection with the refinancing transaction, which would be paid upon closing, and approximately $6 million in original issue discount, which will accrete over the life of the new term loan.
The company has called for redemption of all of its 2018 Notes and 2019 Notes conditioned on raising sufficient funds under the proposed new credit facility and expects to retire the existing term loan and senior notes on August 13, 2014.