COLUMBUS, Ohio – Bread Financial Holdings, Inc. (NYSE:BFH), a personal credit institution, announced on Monday an amendment to its credit agreement that extends the maturity date of its $700 million senior unsecured revolving credit facility to October 18, 2028. The amendment, which also includes a revised pricing schedule with reduced interest rate spreads and commitment fees, aims to improve the company's financial flexibility.
The update to the existing credit agreement, originally dated June 7, 2023, was formalized on October 18, 2024, with JPMorgan Chase (NYSE:JPM) Bank, N.A. serving as the administrative agent. The amendment follows the payoff and termination of all term loans previously outstanding under the agreement in December 2023.
Notably, the amendment introduces a lower drawn interest rate spread and undrawn commitment fee schedule, dependent on the company's tangible common equity ratio. The Term SOFR interest rate plus applicable margin now ranges from 1.50% to 2.50%, and the undrawn commitment fee ranges from 0.25% to 0.45%.
Additionally, the credit agreement's $700 million accordion feature remains, allowing Bread Financial to request new term loan facilities or increase the revolving credit facility. This feature also permits the company to utilize equivalent debt capacity outside of the credit agreement.
The amendment further provides Bread Financial with increased capacity to make dividends, repurchase equity interests, invest in acquisitions, and incur additional indebtedness.
In other recent news, Bread Financial Holdings has experienced a string of developments that may interest investors. The company reported an increase in its net loss rate and delinquency rate for the months ending August and July 2024. This uptick was attributed to a revised calculation method introduced in January 2024. Jefferies adjusted its outlook on Bread Financial, reducing the price target to $50 from $55 while maintaining a Hold rating. This decision was made in anticipation of a rise in the net charge-off rate in the first quarter of 2025.
On a brighter note, the company's second-quarter earnings report exceeded expectations with a net income of $133 million and an adjusted earnings per share of $2.66. In response, RBC Capital increased the price target to $58 from the previous $47, and BofA Securities raised the price target from $46.00 to $54.00. Both firms maintained their respective Sector Perform and Neutral ratings on the stock.
Lastly, Bread Financial has announced strategic partnerships with Saks Fifth Avenue and HP (NYSE:HPQ). Despite these recent developments and a dynamic macroeconomic environment, Bread Financial anticipates a gradual improvement in consumer behavior over the next year.
InvestingPro Insights
Bread Financial's recent amendment to its credit agreement aligns with its current financial position and market performance. According to InvestingPro data, the company has a market capitalization of $2.49 billion and is trading at a low P/E ratio of 5.12, suggesting it may be undervalued relative to its earnings. This could be particularly interesting in light of the improved credit terms, which may enhance the company's financial efficiency.
InvestingPro Tips highlight that Bread Financial has maintained dividend payments for 9 consecutive years, demonstrating a commitment to shareholder returns. This track record of consistent dividends aligns well with the company's recent move to increase its capacity for dividends and equity repurchases through the credit agreement amendment.
The company's stock has shown strong performance, with a significant 82.77% price total return over the past year. This positive momentum, coupled with the new credit facility terms, may position Bread Financial favorably for future growth initiatives mentioned in the article.
For investors seeking a deeper understanding of Bread Financial's prospects, InvestingPro offers 10 additional tips, providing a more comprehensive analysis of the company's financial health and market position.
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