What happened

Shares of Fossil (NASDAQ:FOSL) have skyrocketed today, up by 26% as of 11:30 a.m. EDT, after the company disclosed on Friday evening after the close that it had amended its credit facility. The amendments should give the accessory maker more flexibility as it copes with the COVID-19 pandemic that has crushed many retailers.

So what

Fossil's lenders have agreed to waive quarterly tests for the company's maximum total leverage ratio for fiscal 2020 as well as the first three quarters of fiscal 2021. However, the debt covenants will still require Fossil to maintain specified minimum levels of EBITDA. Minimum monthly liquidity levels have been reduced from $150 million to $125 million, and certain prepayment fees will be waived for approximately three months.

Fossil smartwatches

Image source: Fossil.

The company will also increase its equity interest in certain foreign subsidiaries that are pledged as collateral, while the spread associated with the floating interest rate that Fossil pays has increased by 50 basis points. Fossil made a $15 million principal prepayment, and quarterly amortization payments have also increased.

Now what

On the earnings call last week, COO and CFO Jeff Boyer noted that the changes were incoming.

"We have completed discussions to amend our credit facility to provide greater near-term flexibility which includes financial covenant adjustments through the third quarter of 2021," Boyer said. "We expect the amendment will be finalized and filed in the next few days."

The coronavirus outbreak and related lockdowns have destroyed revenue for many retailers. Fossil did not provide formal guidance due to ongoing uncertainties, but said it expected net sales to decline 60% to 70% in the second quarter.