Dolce & Gabbana secures covenant waiver amid financial challenges

Italian luxury house Dolce & Gabbana has reached an agreement with its lending pool to waive financial covenant breaches and stabilize liquidity following an operating loss and increased debt in its latest fiscal year.

According to a regulatory filing, the privately owned group’s revenue declined 2 percent in the fiscal year ending March 31, falling to 1.86 billion euros (2.17 billion dollars). Expansion in the brand’s beauty division helped mitigate a weaker performance across its core fashion segment. However, operating losses surpassed 100 million euros for the period.

Rising obligations push debt past limits

Net financial debt expanded to 464.5 million euros as of March 31, up from 379.6 million euros in the prior year. The increase triggered a breach in the financial conditions attached to the company’s bank loans.

Under the terms of the newly negotiated agreement, the lending banks waived remedies regarding the covenant breaches and agreed to suspend covenant testing until March 31, 2028. In return, Dolce & Gabbana has committed to executing extraordinary financing transactions designed to strengthen liquidity and reduce its net debt-to-EBITDA ratio below three by March 2028.

Licensing extension generates fresh funds

Advising the group on options to secure fresh capital, financial consultancy Rothschild has explored various avenues, including potential real estate asset disposals.

As part of its capital-raising efforts, Dolce & Gabbana has already generated 150 million euros by extending its long-standing eyewear licensing agreement with French-Italian manufacturer EssilorLuxottica through 2050.