Birkenstock pushes ahead with debt reduction plan

Following its recent listing on Wall Street, Birkenstock Holding plc is implementing a debt reduction programme, using the liquidity made available through the net proceeds of its IPO to repay existing debts.

On November 2, at the end of the latest interest period, the German footwear brand made a partial prepayment of $450 million (€419 million) of its Term Loan B. After this repayment, Birkenstock’s term loan use still amounts to approximately $331 million, approximately €308 million. 

On October 16, Birkenstock had made a partial, €100 million early repayment of its Vendor Loan, which now amounts to approximately €200 million. The €200 million ABL revolving credit facility remains wholly unused, and is therefore available to Birkenstock in its entirety.

Both loans were contracted to finance L Catterton’s acquisition of Birkenstock in April 2021. After this early repayment, Birkenstock’s total debt was reduced from approximately €1.840 billion to around €1.314 billion.

“It’s very simple: we don’t like having debts and we don’t need them, because we run a profitable business with significant liquidity. Early repayment is an important step that shows we are meeting our debt reduction commitment as outlined in the IPO prospectus,” said Oliver Reichert, head of Birkenstock Holding plc and CEO of Birkenstock Group.

The total amount of early credit repayments was significantly higher than what was announced in the IPO prospectus. Early repayment has strengthened the company’s financial position and created additional financial flexibility, Birkenstock Group said. 

After Birkenstock’s shareholding structure changed in April 2021, the group has reduced its debt ratio from 6 times EBITDA to less than 2.5 times. Over the next 18 months, Birkenstock is targeting a debt ratio of less than twice EBITDA. In the long run, the debt ratio is expected to drop to 1. 

“Early repayments are generating extra interest savings of more than €40 million per year. Our robust operational cash flow enables us to finance investments internally. This is in line with our commitment to financial stability and sustainable value creation for our shareholders, through our stringent financial planning,” said Reichert.