Gap Inc. Extends Asset-Based Credit Facility to 2031 With Updated Terms and Expanded Flexibility

Extension of Maturity and Structural Refinements to Core Credit Facility

Gap Inc., a multinational apparel company operating specialty retail brands, amended its primary asset-based lending facility on July 17, 2026, through Amendment No. 2 to its Fourth Amended and Restated Revolving Credit Agreement. The most significant change extends the maturity date from July 13, 2027, to July 2031, providing the company with an additional four-year runway for its $2.2 billion revolving credit facility. Bank of America, N.A., continues to serve as administrative agent and collateral agent under the amended agreement.

The amendment also removes sustainability-linked pricing adjustments that were previously embedded in the facility's terms, streamlining the interest rate structure. Additionally, the update conforms the ABL Credit Agreement to certain regulatory and legal updates that have emerged since the original agreement was established on July 13, 2022. These modifications preserve the core mechanics of the facility while modernizing its operational framework.

Interest Rate Structure and Borrowing Mechanics Under Revised Terms

Loans denominated in U.S. dollars under the amended ABL Credit Facility will bear interest at a per annum rate based on SOFR (subject to a zero floor) plus a margin ranging from 125 to 150 basis points, with the specific margin depending on borrowing base availability. The company retains the option of selecting an alternative per annum base rate equal to the highest of four defined benchmarks: the Federal Funds Rate plus 0.50 percent, the Bank of America prime rate (or the equivalent Toronto-based prime rate for Canadian borrowers), one-month Term SOFR plus 1.00 percent, or 1.00 percent, each case plus a margin of 25 to 50 basis points, also calibrated to borrowing base availability.

Loans denominated in alternative currencies will bear interest at rates specified elsewhere in the ABL Credit Agreement. The rate charged for undrawn availability stands at 25 basis points per annum. These interest rate provisions replace the sustainability-linked pricing that was previously in effect, offering Gap a more conventional and transparent pricing structure aligned with standard market conventions for asset-based credit facilities.

Collateral Base and Guarantee Structure Protecting Lender Interests

The company's obligations under the amended ABL Credit Agreement remain guaranteed by certain of its U.S. and Canadian subsidiaries, maintaining the multi-subsidiary support structure established in prior amendments. The obligations of all Credit Parties—defined as the parent borrower, The Gap, Inc., along with certain U.S. and Canadian subsidiary borrowers and guarantors—are secured by specified U.S. and Canadian assets. The secured interests include a first lien on inventory, certain receivables, and related assets, ensuring lender recourse to the company's most liquid operating assets.

This collateral structure reflects the asset-based nature of the lending arrangement and provides lenders with direct claims against the merchandise inventory and trade receivables that represent the core working capital cycle of Gap's retail operations. The scope and priority of these secured interests have not been materially altered by the amendment, maintaining consistency with the lender protections established in the original 2022 agreement and its first amendment.

Sublimits and Incremental Capacity Available to the Company

The maximum availability under the ABL Credit Facility remains at $2.2 billion, available to Gap for revolving loans in U.S. dollars or alternative currencies as defined in the agreement. Within this overall commitment, the facility includes three distinct sublimits: a $300 million sublimit for the issuance of letters of credit, a $200 million sublimit for swingline loans, and a $200 million sublimit specifically for borrowings by the Canadian Borrowers as defined in the amended agreement. These sublimits allocate portions of the overall $2.2 billion capacity to specific use cases and borrower entities within the corporate structure.

The company also has the ability to increase availability or add term loans on a "last-out" basis in an aggregate amount not to exceed the sum of the greater of $500 million and any suppressed availability, plus any voluntary reductions of commitments, provided that the aggregate amount of such "last-out" term loans may not exceed $100 million. This incremental capacity feature provides Gap with additional flexibility to expand its borrowing base should operational needs or strategic opportunities require enhanced liquidity during the extended term through 2031.

Operating Covenants and Restrictions on Corporate Activities

The ABL Credit Agreement continues to contain customary covenants that restrict the company's activities and those of its subsidiaries in several key areas. These restrictions include limitations on the company's ability to sell assets, engage in mergers or other fundamental changes, enter into capital leases or certain leases not in the ordinary course of business, enter into transactions involving related parties or derivatives, and incur or prepay indebtedness. Additional covenants restrict the company's ability to grant liens or negative pledges on its assets, make loans or other investments, pay dividends or repurchase stock or other securities, guarantee third-party obligations, engage in sale-leasebacks, and make changes in its corporate structure.

Notably, many of these covenants operate on a tiered basis, with stricter applicability triggered when unused availability falls below specified thresholds. This threshold-based structure allows Gap greater operational flexibility when liquidity is abundant while ensuring tighter restrictions during periods of constrained borrowing capacity. The agreement also includes a springing fixed charge coverage ratio as a financial covenant, which becomes operative when availability declines below a specified level, creating an additional safeguard for lender interests during stressed liquidity scenarios.

Default Provisions and Consequences of Material Breaches

The amended ABL Credit Agreement maintains customary events of default that provide lenders with remedies if Gap or its guarantors fail to meet their obligations. These default triggers include payment failures on any borrowed amounts, breaches of representations and warranties provided by the company, failure to comply with the covenants described above, failure to satisfy other obligations under the agreement or related documents, and defaults in respect of other material indebtedness of the company or guarantors. The agreement specifies a cross-default provision applicable when a default occurs on other indebtedness exceeding a specified amount and the applicable grace period has expired, giving the lenders of that other indebtedness the right to accelerate.

Additional events of default encompass bankruptcy or insolvency proceedings, inability to pay debts when due, material judgments against the company or guarantors, pension plan terminations or specified underfunding, change of control of the company, and failure of certain provisions of any guarantee or security document to remain in full force and effect. If an event of default occurs, subject to any applicable grace period, the Lenders may terminate their commitments, declare all borrowings immediately payable, and foreclose on the collateral securing the facility. These default provisions align with market standards for asset-based lending arrangements of this size and complexity.

Use of Proceeds and Capital Allocation Framework

The proceeds available under the amended ABL Credit Facility are designated for working capital, capital expenditures, and other general corporate purposes for Gap and its subsidiaries from time to time. This broad formulation provides the company with flexibility to deploy borrowed funds across various operational and strategic needs without requirement for lender approval of each individual use, provided the overall usage remains within the general corporate purposes standard. For a multi-brand retailer like Gap, which operates several distinct apparel concepts, this flexibility is material to managing seasonal working capital fluctuations, funding store remodels and expansions, and supporting information technology investments.

The facility may be drawn upon through revolving loans that can be made and repaid at the company's discretion until the maturity date in July 2031. Gap retains the ability to make voluntary prepayments of borrowings at any time without penalty, and the company is obligated to make mandatory prepayments upon the occurrence of specific events as defined in the agreement. This structure maintains the company's control over its capital structure while respecting lender requirements for mandatory paydowns triggered by defined corporate events.

Regulatory Modernization and Market Standard Alignment in Credit Facility Terms

The amendment identifies that it conforms the ABL Credit Agreement to certain regulatory and legal updates, though the disclosure does not specify the precise nature of each regulatory change addressed. This modernization likely reflects evolving regulatory expectations around loan agreement documentation, market practice developments in the asset-based lending industry since the facility's original establishment in 2022, and potentially updates related to federal rate-setting mechanisms or other statutory requirements. The removal of sustainability-linked pricing adjustments may itself represent a recalibration of market appetite for environmental, social, and governance-linked financial terms.

By extending the maturity to July 2031 and updating the facility's terms, Gap has secured medium-term liquidity certainty while aligning its credit documentation with current market standards and regulatory expectations. The amendment preserves the fundamental structure of the $2.2 billion asset-based facility while creating operational clarity around interest pricing, collateral arrangements, and covenant frameworks. This refinancing approach is characteristic of companies seeking to maintain reliable access to capital without undergoing a comprehensive restructuring or refinancing process.