Levi Strauss & Co. tried the private placement market on for size last week with its first-ever term securitization offering via Banc One Capital Markets. The $110 million trade receivables transaction is backed by retail merchandise sold to the top ten domestic department stores and other retail outlets.
Enhancing the single three-year tranche’s AAA/Aaa’ (S&P/Moody’s) rating is substantial over-collateralization and a dynamic reserve driven by actual collateral performance. The deal was launched at 32 basis points over one-month libor, with pricing scheduled for last Friday.
Usually done in the asset-backed commercial paper market, trade receivables deals have been growing in number, cooling the conduit market’s zealousness to a degree for these transactions.
“It makes more sense for [Levis] from a capital structuring standpoint to have a term piece in addition to the conduit market,” said one analyst. “The asset-backed commercial paper market is still growing, but liquidity is becoming more of a consideration; banks are charging more for the liquidity lines that they provide for these types of transactions, so I think it makes term funding more competitive from a cost perspective.”
Levi Straus & Co. is the world’s No. 1 maker of brand-name clothing. The company sells jeans and sportswear under the Levi’s, Dockers, and Slates names in over 80 countries.
