Regis (RGS) to Offer 11.5M Shares of Common, $125M Convertible Senior Notes; Reports Q4 Sales Results
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Regis Corporation (NYSE: RGS) today announced a public offering of common stock and convertible senior notes.
Regis Corporation intends to offer (subject to market and other conditions) approximately 11,500,000 shares of common stock in an underwritten public offering. In connection with this offering, Regis Corporation intends to grant the underwriters an option to purchase up to an additional 1,725,000 shares of common stock.
Regis Corporation also intends to offer concurrently (subject to market and other conditions) $125 million aggregate principal amount of convertible senior notes due 2014 in an underwritten registered public offering. Regis Corporation intends to grant the underwriters an option to purchase up to an additional $18.75 million in aggregate principal amount of convertible senior notes. The convertible senior notes will be convertible at the option of holders, under certain circumstances, into cash, shares of Regis Corporation common stock, or a combination of cash and shares, at the option of Regis Corporation. The offering price, interest rate, conversion price and other terms of the convertible senior notes will be determined by Regis Corporation and the underwriters.
Regis Corporation intends to use the proceeds to repay $267 million of private placement debt of varying maturities. The remaining proceeds will be used for general corporate purposes including the repayment of bank debt.
Merrill Lynch & Co. and Credit Suisse Securities (USA) LLC are acting as the lead underwriters for the convertible notes offering and the common stock offering.
In connection with the common stock and convertible senior note offerings, Regis Corporation (the "Company") has undertaken several initiatives aimed at reequitizing and deleveraging its balance sheet. It has amended its revolving credit facility and term loan facility and private shelf facility in order to provide relief with respect to certain covenants, particularly by lowering its fixed charge coverage ratio requirement from 1.5 to 1.3 times. As of March 31, 2009, the Company's fixed charge coverage ratio was 1.61 times. As a result of the amendments, the capacity under the Company's revolving credit facility has been reduced from $350 million to $300 million and the Company expects the coupon rate on its credit facilities and private placement notes to initially increase by a range of 0% to 1.75%, with an expected weighted average increase of 1.1%. Additionally, the Company plans to use the net proceeds of these offerings to repay $267 million aggregate principal amount of certain outstanding senior notes. The Company has negotiated to prepay these notes with a premium over their principal amount that is less than the current make-whole premium. The Company believes that these initiatives strengthen its balance sheet, improve its leverage ratios and provide additional flexibility to resume its long-term growth strategy when the economy recovers or when customer visitation patterns normalize. These initiatives are contingent upon the completion of the concurrent note and common stock offerings and certain other conditions in the amendments.
Reports Q4 sales fell 2.5% to $625 million, versus the consensus of $617.95 million. Same store sales fell 4% during the quarter, while FY09 comps declined 3.1%.
The Company also provided an update on several fourth quarter items. The Company now believes that total debt at the end of fiscal 2009 is expected to be between $635 and $650 million, significantly below the previously announced goal of $700 million. The Company's debt stood at $807 million as of September 30, 2008. The debt reduction was primarily the result of reducing overhead expenses, efficiently managing working capital and international cash balances, and reducing capital expenditures for new stores and acquisitions.
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