Rent the Runway (NASDAQ:RENT) shares were up around +8.4% just ahead of market open on Tuesday after it extended the maturity date of its existing debt facility from October 2024 to October 2026.
The restructured credit facility also has certain amended terms and reduced cash interest payments, totaling over $20M over the next two years.
Rent the Runway expects the debt restructuring to improve its strategic flexibility, financial profile, cash flow trajectory and ability to fund profitable growth.
The restructuring is part of broad-based attempts by the e-commerce fashion rental company to improve its cost structure and profitability. These efforts have led to it doubling gross margins since 2019 to 41% in Q3 2022.
The cash interest rate has been reduced from 12% (7% cash and 5% in kind) to 2% cash interest from February 1, 2023 through July 31, 2024, increasing to 5% for the remainder. The remaining interest in each period will be paid in kind.
The total interest rate will remain unchanged at 12% through January 31, 2024, subsequently increasing 1% annually.
Under the new terms, the lender will receive new warrants to purchase 2M shares of Class A stock at $5/share strike price.
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