Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
As previously disclosed, The Gap, Inc. (the "Company") and certain of its
subsidiaries are party to the Second Amended and Restated Credit Agreement dated
May 31, 2018 (the "Credit Agreement"). The Credit Agreement provides the Company
a $500 million revolving credit facility (the "Revolver"). A copy of the Credit
Agreement, as amended, was filed as an exhibit to the Company's 10-Q filed with
the Securities and Exchange Commission on August 31, 2018.
On March 25, 2020, the Company drew down the entire available amount ($500
million) under the Revolver resulting in a total of $500 million outstanding
under the Revolver. Borrowings under the Revolver are scheduled to mature on May
31, 2023, and the Company may repay amounts borrowed at any time prior to
maturity without penalty (other than potential LIBOR breakage fees).
Borrowings under the Revolver will bear interest, at the Company's option, at a
base rate or LIBOR, plus an applicable interest rate margin varying depending on
the Company's corporate ratings or leverage ratio, whichever yields a lower
pricing level. The additional interest rate margin for borrowings ranges from
0.00% to 0.50% per annum in the case of base rate borrowings and from 0.90% to
1.50% per annum in the case of LIBOR borrowings. With respect to this draw of
$500 million under the Revolver, the Company has elected a six month LIBOR rate,
plus a current 1.1% margin, for a total interest rate of 2.073250%. The Company
elected to borrow under the Revolver as a precautionary measure in order to
increase its cash position and preserve financial flexibility in light of
current uncertainty in the global markets resulting from the COVID-19 outbreak.
The draw-down proceeds from the Revolver are currently being held on the
Company's balance sheet and may be used for general corporate purposes.
Item 7.01 Regulation FD Disclosure.
On March 26, 2020, the Company issued a press release announcing that it was
deferring the record and payment dates for its previously declared first quarter
dividend to the first quarter of fiscal year 2021 and suspending its dividend
program for the remainder of fiscal year 2020. A copy of the press release is
furnished hereto as Exhibit 99.1. The previously declared dividend will now be
payable on or after April 28, 2021 to shareholders of record at the close of
business on April 7, 2021. The Company's board of directors determined that
deferring payment of the previously announced dividend was in the best interests
of the Company in order to preserve liquidity in the context of the impact of
COVID-19 on the Company's operations. The Company reserves the right to further
defer the record and payment dates for the previously declared first quarter
dividend, depending upon, among other factors, the progression of the COVID-19
outbreak, business performance and the macroeconomic environment.
On March 26, 2020, the Company also announced in the same press release that,
given the uncertainty regarding the potential duration and impact of COVID-19,
it is withdrawing the full year 2020 guidance issued on March 12, 2020 and is
not providing an updated outlook at this time. A copy of the press release is
furnished hereto as Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Exhibit Description
99.1 Press Release dated March 26, 2020
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
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