Debt financings often come and go together with little note in fashion. 

But with the Federal Reserve pushing up rates of interest to fight inflation, what would have been run-of-the-mill tweaks to corporate balance sheets are starting to return under the microscope. 

Witness VF Corp., which loaded up with debt to purchase Supreme for $2.1 billion in 2020 and is facing what’s change into an inconvenient refinancing. The corporate’s Vans brand is within the midst of a turnaround, investors are fretting over the corporate’s dividend payment and the search to replace former chief executive officer Steve Rendle continues. 

The corporate, also parent to The North Face, Timberland and other brands, has 850 million euros of senior notes coming due in September.

But whereas that debt got here with an interest payment of just 0.625 percent, the refinancing will come dearly.

The Fed ratcheted up its benchmark rate of interest seven times last yr — going from a spread of zero to 0.25 percent to a spread of 4.25 to 4.5 percent — making it far more expensive to borrow money.

And since Bloomberg reported last month that VF was considering selling off its Jansport business, analysts have been speculating that the corporate could get rid of that business in addition to other brands, perhaps Kipling and Eastpak as well, and perhaps Napapijri, all of which reside within the group’s lively portfolio. 

Tom Nikic, an analyst at Wedbush, said: “Between rising rates of interest, the debt raised to finance the Supreme deal, and the corporate’s recent financial choppiness, they might presumably need to refinance these notes at a much higher rate of interest, in order that they might prefer to divest some non-core assets to lift money to assist repay the notes at maturity, quite than refinancing the complete amount.

“In the event that they’re trying to generate $500 million of money, they’d probably need to sell all 4 ‘non-core’ lively brands — the brands excluding Vans and Supreme —which generate about $700 million of revenue combined, so a 0.7x sales multiple would yield [approximately] $500 million of proceeds,” Nikic said. 

VF hasn’t been acting so very similar to the style powerhouse it was. But when its refinancing is causing a lot angst, one can only assume that other firms are usually not far behind. 

Financial sources tell WWD the large banks that typically finance fashion’s mega players are being more cautious, forcing firms to be more creative as they prepare to power out of any consumer slowdown or to only keep the lights on.