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Staples Refinances Debt, Averts Billions in Loans Coming Due

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On June 13th, Staples, Inc. reported that it had successfully completed comprehensive debt refinancing, resulting in a reduction of the company’s outstanding debt and an extension of its maturities to over five years. The company says the move positions it to further extend its leadership position as U.S.’s leading distributor of workspace products and logistics services.

Staples’ debt challenges go back to 2017. At that time, private-equity firm Sycamore Partners acquired Staples, an office-supply chain company, for $6.9 billion. But Sycamore financed the acquisition through $5.7 billion in debt, which became due earlier this spring.

According to Bloomberg data, that $6 billion included an almost $300 million loan that was to mature this year, and more than $5 billion coming due in 2026, both of which Staples appears to have refinanced for five years.

According to law firm Latham and Watkins, which is said to have advised Staples, the company closed on $2.375 billion of 10.75 percent secured notes due in 2029.

Staples is known for several failed attempts to acquire competitor  Office Depot. In 2016, the U.S. Federal Trade Commission blocked Staples bid on anti-competition grounds.

Success

Staples said the successful refinancing was driven by Staples’ strong financial performance in recent years, as demonstrated by:

  • Revenue growth of 1 to 2 percent  annually over the last decade;
  • Three consecutive years of double-digit EBITDA (earnings before interest, taxes, depreciation, and amoritization) growth; and
  • Highly efficient distribution and logistics capabilities, with the company delivering to 98 percent of the U.S. the next day.

Staples Executive Chairman and CEO John Lederer noted, “Staples has long been the leader in workspace products and solutions, delivering relentless innovation to our customers through our human touch and expert know-how, differentiated digital solutions, and a highly efficient supply chain. This commitment to serving our customers has generated industry-leading revenue and EBITDA growth over the last several years.”

“We are pleased with the successful outcome of our debt refinancing, which enhances our ability to execute over the long-term while solidifying the financial foundation of the company,” commented Staples CFO Jeff Hall. “The actions taken are a testament to our strong business and continued performance, validating the confidence we have in our strategy and the support for Staples in multiple capital markets.”

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