In arranging its refinancing program, Safilo has avoided another costly bond, which would have weighed on its profit and loss account. The company already has to repay a convertible bond of €150 million that is due to mature next May.
The issuance of a bond was considered but not enacted. Whether this was due to chance or design is not known, but insiders noted that the Italian corporate bond market dried out “within a week,” largely due to tension on the capital markets in the wake of the budgetary proposals of the recently elected populist government.
The refinancing package puts Safilo in a healthy position to implement the revised version of its business plan to 2020 (see Eyewear Intelligence Vol. 19 n°12).
With the forthcoming cash call and the €30 million received in September from Kering as the third and final installment for the early termination of the Gucci license, Safilo is expected to end the year with a slightly negative financial position, practically erasing a net debt which stood at €171.1 million at the end of June.
The group will also benefit from abundant liquidity thanks to the capital increase. It had €112.9 million in cash on its balance sheet at the end of June, and the new financing deal with the banks will give it a boost. But, the funds will diminish significantly with the repayment of its €150 million bond next May. Safilo will be able to stabilize the situation only with the generation of additional cash.
In the first half of 2018, Safilo had negative free cash flow of €37.3 million. In the second half of the year, the situation should improve thanks to the payment of receivables that totaled €185.8 million at the end of June. The company will probably end with slightly negative free cash flow for the whole of the 2018.