RH to explore $300M offering of notes to pay down debt

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Corte Madera-based RH (NYSE: RH), a luxury furnishings and hardware retailer, announced plans Thursday to explore selling of $300 million aggregate principal amount of convertible notes due 2024 “in a private offering to qualified institutional buyers.”

Proceeds of any offering will go to retiring $200 million in “second lien debt” as well reduce other debt and pay the costs of the note issue.

If the company applies the sale proceeds to the second lien debt, it states, retirement of that debt would reduce interest expense by approximately $6.5 million in the second half of fiscal 2019, and $18 million on an annual basis. In doing so, RH stated, the company could increase adjusted diluted earnings per share by approximately $0.20 to $0.25 this year, and $0.65 to $0.70 in fiscal 2020.

The notes’ interest rate, conversion price and other terms of any new issuance of notes are subject are to be determined. “The notes would be convertible into cash, shares of RH’s common stock, or a combination thereof, at RH’s election,” it stated.

On Tuesday, RH reported fiscal second-quarter profit of $63.8 million, up 1.35% from a year before.

On a per-share basis, the company said it had net income of $2.86 per share for the quarter ended Aug. 3, up 24.9% over 12 months. Earnings, adjusted for nonrecurring costs, came to $3.20 per share.

The results beat Wall Street expectations. The average estimate of eight analysts surveyed by Zacks Investment Research was for earnings of $2.70 per share.

RH Marin, a gallery under construction at the Village at Corte Madera shopping center, is among three set to open in the second half of the fiscal year, Freidman said. Five to seven openings are planned next fiscal year, with seven more in fiscal 2021.

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