Why Blue Apron Revised Its Revolving Credit Agreement


Oct. 19 2018, Updated 7:31 a.m. ET

Credit maturity period extended

Blue Apron (APRN) has a revolving credit agreement with a lender syndicate led by Morgan Stanley (MS). It announced on October 10 that it has revised its agreement with these lenders with changes including the final maturity of the credit being extended to February 2021 from August 2019, and the aggregate lender commitments being reduced to $85 million. Blue Apron will also pay more in interest on the credit facility as part of the revised agreement.

Overall, Blue Apron expects the revision of the credit agreement to give it more financial flexibility so it can continue investing in creating new products, marketing its business, and expanding its distribution channels.

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$34.6 million spent toward marketing

The company spent $51 million on product development and other administrative work in the second quarter. It spent $34.6 million on marketing activities in the second quarter with the spending level maintained from a year ago. Amazon (AMZN) and Shopify (SHOP) increased their marketing spending by 9.1% and 59.4% year-over-year, respectively, in the second quarter.

Blue Apron wants to end losses

In terms of expanding distribution channels, Blue Apron is underway with a pilot of an on-demand program where customers in New York City can order meal kits on-demand for delivery to their homes within an hour. Blue Apron is initially working with GrubHub (GRUB) and Seamless on that program but has plans to expand it. Uber and Square (SQ), which runs Caviar online food delivery service, could be potential partners for Blue Apron as it seeks to expand the on-demand program.

Blue Apron has been reporting losses all along, but it has its sight set on hitting the break-even mark in 2019.


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