Birkenstock Holding plc, the German footwear brand that recently made its debut on Wall Street, is taking significant steps to reduce its debt levels. The company has announced that it plans to utilize the funds generated from its initial public offering (IPO) to repay its existing debts, showcasing its commitment to financial stability.

On November 2, Birkenstock made a partial prepayment of $450 million (€419 million) of its Term Loan B, resulting in a reduction of its outstanding debt to approximately $331 million (€308 million). Furthermore, the company made an early partial repayment of €100 million on its Vendor Loan on October 16, lowering the remaining balance to around €200 million. The ABL revolving credit facility of €200 million remains untouched and fully accessible.

Both of these loans were initially taken out to finance the acquisition of Birkenstock by L Catterton in April 2021. With these recent repayments, Birkenstock has successfully decreased its total debt from approximately €1.840 billion to about €1.314 billion.

Oliver Reichert, CEO of Birkenstock, underscored the company’s determination to reduce its debt burden, emphasizing, “We don’t like having debts and we don’t need them because we run a profitable business with significant liquidity.” He further affirmed that the early repayments demonstrate Birkenstock’s commitment to achieving its debt reduction objectives that were outlined in the IPO prospectus.

The total amount of early credit repayments surpassed the initial announcement made in the IPO prospectus. This development has not only enhanced Birkenstock’s financial position but has also granted the company greater financial flexibility. Since the change in the company’s shareholding structure earlier this year, Birkenstock has successfully reduced its debt ratio from 6 times EBITDA to less than 2.5 times. Over the next 18 months, the company seeks to further decrease its debt ratio to less than twice EBITDA, with the long-term goal of reaching a ratio of 1.

Reichert highlighted the advantages of the early repayments, revealing that they will lead to annual interest savings of over €40 million. Birkenstock’s strong operational cash flow enables it to internally finance investments, aligning with its commitment to financial stability and sustainable value creation for shareholders.

By implementing its debt reduction plan, Birkenstock is fortifying its financial position and showcasing its dedication to prudent financial management. With a successful IPO under its belt and ongoing efforts to reduce debt, the company is well-positioned for future growth and profitability.

Useful links:
Birkenstock Management Team
Birkenstock Investor Relations