Scholastic Corp (NASDAQ:SCHL), a global children's publishing, education, and media company with a market capitalization of $737 million, has amended its credit agreement, enhancing financial flexibility. According to InvestingPro analysis, the company is currently trading below its Fair Value, suggesting potential upside opportunity.
The company entered into a Third Amendment to the Amended and Restated Credit Agreement with a syndicate of banks, led by Bank of America (NYSE:BAC), N.A., on Monday, November 26, 2024.
The amendment provides Scholastic with a $400 million unsecured revolving credit facility, which can be accessed until its maturity on November 26, 2029. The facility includes an accordion feature allowing for an increase up to an additional $150 million, subject to certain conditions.
This enhanced credit facility comes at a time when the company maintains strong liquidity, with InvestingPro data showing liquid assets exceeding short-term obligations and a healthy current ratio of 1.14.
A significant change in the amendment is the removal of a 0.10% credit spread adjustment for Term SOFR loans, reducing borrowing costs. The credit agreement also permits unlimited common stock dividend payments and share repurchases, provided Scholastic maintains a pro forma Consolidated Net Leverage Ratio not exceeding 2.75:1.
Interest rates for Base Rate Advances are set at the highest of the prime rate, Federal Funds rate plus 0.50%, or the Term SOFR Rate plus 1.00%, with an applicable margin of 0.625% to 0.875%. Term SOFR Advances will be the Term SOFR rate plus a margin of 1.625% to 1.875%. These rates are contingent upon the company's Consolidated Net Leverage Ratio.
The agreement also specifies a commitment fee on the unused revolving credit, ranging from 0.20% to 0.30% annually, based on the Consolidated Leverage Ratio. Up to $50 million of the facility is available for letters of credit, and up to $15 million for swingline loans.
Scholastic remains subject to financial covenants related to leverage and interest coverage ratios, limitations on dividends and other distributions, and restrictions on fundamental changes to the business.
This strategic financial move, as reported in the SEC filing, positions Scholastic to maintain operational and financial agility for the foreseeable future. The company has demonstrated strong shareholder commitment, maintaining dividend payments for 17 consecutive years while management actively pursues share buybacks.
For deeper insights into Scholastic's financial health and future prospects, including additional ProTips and comprehensive analysis, visit InvestingPro, where you'll find detailed research reports and expert financial metrics.
In other recent news, Scholastic Corporation reported mixed fiscal first quarter results. The company recorded a loss of $2.13 per share, a figure wider than analysts' estimates of a loss of $1.81 per share. On a brighter note, Scholastic's revenue reached $237.2 million, surpassing the consensus forecast of $235.61 million.
The company's first quarter, typically its slowest due to school summer breaks, saw an improvement in operating loss compared to the same period last year. Notably, revenue rose 4% year-over-year, a boost attributed to the recent acquisition of 9 Story Media Group, although this was partially offset by lower sales in the Education Solutions segment.
The Children's Book Publishing and Distribution segment witnessed a 3% revenue increase, with Book Fairs revenue climbing by 5%. These are recent developments that indicate the company's ongoing efforts to expand its core businesses and develop new literacy programs, as reaffirmed in its fiscal 2025 guidance.
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