Victoria’s Secret seeks $ 500 million loan to split funds with Bath & Body Works: Bloomberg



Brief description of the dive:

  • Victoria’s Secret by L Brands seeks investors for a loan of $ 500 million that the lingerie retailer will use to fund its Bath & Body Works division, according to a Bloomberg report citing an anonymous source.
  • The loan matures in 2028. Victoria’s Secret is currently privately selling loans to investors, according to Bloomberg.
  • IN document Victoria’s Secret said this week that it could borrow up to $ 1 billion in debt to fund a cash payment to L Brands as part of the split deal.

Dive Insight:

L Brands is gaining momentum, moving along a forked path. After flirting and refusing potential buyersThe company is deepening its preparations for a Victoria’s Secret spin-off and separation of two retail banners that have long been on different trajectories. L Brands this week submitted plans with the Securities and Exchange Commission to Disable Victoria’s Secret to his own public company “Victoria’s Secret & Co.”

Last year, the company entered into a deal to sell majority share private investment company Sycamore Partners. But the deal fell apart amid the riots associated with COVID-19. The latest plans include an even clearer break between Victoria’s Secret and Bath & Body Works.

Although Victoria’s Secret has generated huge income, she has been the troubled child of L Brands in recent years. The lingerie brand fell into disrepair with the advent of DTC and other competitors. What’s more, its marketing traditions are badly outdated in the #MeToo era.

Victoria’s Secret has tried to transform itself for years to reverse its decline. His last effort this is “VS Collective, “a group of women influencers, including sports stars and activists, who the company says will shape the brand’s trade and messaging in the future. As we move towards corporate independence, the new Victoria’s Secret board is also almost entirely female.

IN presentation In conjunction with the split, L Brands is forecasting medium-to-single-digit growth in Victoria’s Secret sales over the next three to five years, an improvement over past recession years. Digital penetration is also expected to reach 50% of Victoria’s Secret sales. This would make the retailer, with its nearly 870 stores in North America, a very different business from the mall it has been for its entire life. In 2019, digital penetration was 25%.

Meanwhile, Bath & Body Works has grown steadily thanks to loyal fan baseas well as the merchandising and marketing strategy that gained acceptance in the Instagram era. Bath & Body Works even managed to increase its sales during the 2020 pandemic, while many of its malls suffered or simply survived.

The separation of the companies, according to L Brands, will help each to focus on their unique business. Regarding the cash payment that Victoria’s Secret will make at the exit, the company said in its filing this week that L Brands will use the money to pay off the related debt and repurchase shares as part of the restructuring.

After the Victoria’s Secret breakup “will have debt obligations that could restrict our business and adversely affect our results of operations, financial condition or cash flows, “the company warned investors.” In addition, divesting our business from LB could increase the total cost of debt financing and reduce the overall creditworthiness and commercial credit available to us. ”

L Brands said it plans to complete the Victoria’s Secret and Bath & Body Works separation by August this year.


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