Hingham, Mass. The Talbots, Inc. announced Monday it had finalized the terms of the previously announced $200 million unsecured term loan facility from Aeon Co., Ltd., which through its wholly owned subsidiary is Talbots’ majority shareholder.
The interest-only term loan has been used to pay in full the company’s existing acquisition debt. Talbots also announced that its board of directors has voted to immediately suspend the company’s quarterly dividend on its common stock and freeze the company’s pension plans in order to further improve liquidity.
“During these extraordinarily challenging times, it’s essential that we take these difficult yet necessary measures to conservatively manage our business,” said Trudy F. Sullivan, Talbots president and CEO. “With the finalized term loan from Aeon and payment in full of our acquisition debt, we have greatly enhanced our liquidity and increased our financial flexibility.”
Talbots also said it has entered into a revolving credit agreement with Bank of Tokyo-Mitsubishi to convert its existing uncommitted working capital line of $15 million to a committed line, effective immediately. As such, the company’s total working capital borrowing capacity of $215 million is committed and is in addition to the new term loan facility from Aeon.
With the two aforementioned actions decided by the board of directors, Talbots said it now expects to increase 2009 cash flow by approximately $35 million. This is in addition to a previously announced $75 million improvement to cash flow resulting from a new interest-only term loan facility.