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W&L Had Dip a Week Before Filing Ch. 11

NEW YORK -- Woodward & Lothrop locked in its $300 million debtor-in-possession package one week before its Chapter 11 filing, according to court documents.<BR><BR>W&L entered bankruptcy proceedings here on Monday. As late as last Friday,...

NEW YORK — Woodward & Lothrop locked in its $300 million debtor-in-possession package one week before its Chapter 11 filing, according to court documents.

W&L entered bankruptcy proceedings here on Monday. As late as last Friday, however, the company issued a statement saying Chapter 11 rumors were old news and that bankruptcy was only one of the options under consideration.

Court documents show a commitment letter between W&L and CIT Group for the financing. The letter was dated Jan. 11.

The papers, filed in connection with a motion for approval of the DIP financing, also reveal that Robert Mang, named chairman and chief executive officer this week, has received a new five-year, $600,000-a-year employment contract.

The new deal represents a $125,000 pay raise for Mang, who had been president and chief operating officer. He succeeded Arnold Aronson, who resigned last Friday.

Mang’s salary is secured by a $2 million letter of credit, which will cost the company about $40,000 a year in fees, the documents added.

W&L called the cost of maintaining the letter of credit “modest,” “especially when measured against the costs, inducements and disruptions that would be occasioned by any search for, and retention of, a hired-party candidate of equal qualifications and commitment.”

At a hearing Thursday on the DIP financing, W&L’s trade debt was put at $100 million as of the date of the filing. Inventory was valued at $170 million. The court approved $60 million in interim DIP financing and set Feb. 8 for a hearing on the entire $300 million.

The financing consists of two separate $150 million revolving credit lines, one based on inventory levels and the other on receivables. The lines are secured by all of W&L’s current assets, except inventory.

Court documents added that W&L paid a $1 million commitment fee to CIT Group. The lender will also receive amounts equal to 2 percent of the total $300 million package, a $150,000 agent’s fee and 0.5 percent on the unused portion of the lines. The loans carry an interest rate of 1.5 percentage points over the prime rate.