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While the pandemic made its merger with the French luxury group LVMH more complex and caused its turnover to fall by 44% in the first quarter, Tiffany announced on Tuesday that it had renegotiated certain agreements on its debt in order to have more financial leeway. The American jeweller was thus able to raise its maximum debt ratio from 3.5 to 4.5.
Tiffany’s turnover was reduced to $555.5 million, or 489.6 million euros, in the first quarter. This represents a net loss of $64.6 million (56.9 million euros) over this period, compared to a profit of $125.2 million (110.3 million euros) a year earlier.
The jeweller nevertheless reported a recovery in sales in its predominant market, the Chinese market, even though sales were still down 40% in May. The jeweller estimates that, thanks to $500 million drawn from one of its credit facilities in the first quarter, it has sufficient liquidity and is in full compliance with all its debt covenants.
These announcements allow the American group to strengthen its plan to merge with LVMH. Some analysts believed before these measures that the jeweller might no longer meet its debt covenants in the second quarter.
“The new clauses negotiated by Tiffany on its debt should reduce the risk of covenant violations that could have jeopardized this acquisition,” considers Michael Binetti, analyst at Credit Suisse.
The $16 billion acquisition of Tiffany by LVMH therefore appears to be on track to be completed as agreed in mid-2020.
“I am convinced that the best for Tiffany is ahead of us and I am very pleased with the journey ahead with LVMH at our side,” said Alessandro Bogliolo, CEO of Tiffany, in a statement. For his part, LVMH CEO Bernard Arnault has renewed his commitment to the group’s acquisition.
Read also > IS LVMH’S TAKEOVER OF TIFFANY COMPROMISED ?
Featured photo : © Tiffany
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