Tapestry Inc., the owner of brands including Coach and Kate Spade, has entered into the largest high-grade loan financing for a merger or acquisition so far this year to help fund its purchase of Capri Holdings Ltd.
The accessories brand house secured an $8 billion bridge loan to help fund its $8.5 billion deal for the luxury accessory group — home to such brands as Michael Kors, Jimmy Choo and others — according to a news release Thursday. It surpasses the $5.7 billion bridge loan Nasdaq Inc. secured for its purchase of financial-software maker Adenza in June, according to data compiled by Bloomberg. Bank of America Corp. and Morgan Stanley committed the financing.
Tapestry’s financing adds to a growing pipeline of M&A funding that is likely to be sold in the investment-grade primary market as bonds. Bridge loans are typically later replaced with permanent financing in the bond market that is sold to institutional investors. Some deals, like Microsoft Corp. and Broadcom Inc., are beginning to clear regulatory hurdles, bringing the companies closer to having to finance the acquisitions of Activision Blizzard Inc. and VMware Inc., respectively.
The company expects to fund the $8.5 billion purchase through a combination of senior notes, term loans and excess Tapestry cash, using a portion of it to pay down some of Capri’s debt.
“We secured a bridge facility as is typical in public deals to have funds certain for transaction close,” Tapestry’s chief communications officer, Andrea Shaw Resnick, said in an email. “As we secure our term loans and bonds, we will ultimately terminate the bridge facility since we will have the permanent financing required for closing.”
Bank of America declined to comment. Morgan Stanley, Microsoft and Broadcom didn’t respond to requests for comment.
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“Our diversified, strong, and consistent cash flows will allow us to continue to invest in our business and rapidly pay down debt,” Tapestry’s chief financial officer and chief operating officer, Scott Roe, said in the release.
The firm last tapped the high-grade market in 2021, when it sold $500 million of bonds to repurchase notes in a cash tender offer. Tapestry had about $652 million cash and equivalents as of April 1, and about $1.7 billion of outstanding debt, meanwhile Capri has about $1.8 billion, according to data compiled by Bloomberg.
(Updates with company comments in fifth and sixth paragraphs.)