By  on November 22, 2004

NEW YORK — BCBG Max Azria could close on a new financial restructuring deal this week, which is expected to involve an investment-grade bond offering, sources close to the deal said.

The bonds, based on income stream and backed by BCBG’s trademarks and licenses, are expected to be self-liquidating over a certain period of time, which has yet to be revealed. Proceeds would be used by BCBG to pay down debt and fund working capital needs. Sources said UCC Capital, which specializes in similarly collaterized vehicles, is putting the deal together.

Officials at UCC Capital and BCBG declined comment.

Officials at GMAC Commercial Credit, which is said to be involved in the deal, didn’t return calls by press time.

Financial sources on the East and West Coasts said the financing would allow BCBG to continue growing its business and make further inroads on its retail expansion strategy.

BCBG has been dogged in recent years by rumblings of financial pressure because of an overly ambitious expansion plan. In August 2001, there was concern in the financial community that BCBG was headed toward a bankruptcy filing, with the speculation fueled by expectations that a bankruptcy would be the easiest way to get out of underperforming retail outlets. BCBG got out of that jam through financing from GMAC.

Talks about an asset-based financing with UCC Capital surfaced in the summer of 2003, but then discussions were put on hold earlier this year. Market sources said BCBG then began exploring other avenues, such as a sale of the company. Discussions with one apparel giant, Liz Claiborne, took place in mid-summer. A spokeswoman for Liz Claiborne declined comment. When those talks ended, BCBG resumed talks with UCC.

Once the deal is finalized, however, there would still be a question mark regarding where BCBG fits in the marketplace. One criticism from a New York factor is that BCBG is “too contemporary for the stores that they have, which are in upscale markets.”

“They’re one of the core players in contemporary and many times they’re the first on trend, such as this season’s fur ponchos,” said Sandy Richman, principal at Directives West, a Los Angeles-based buying office.— With contributions from Nola Sarkisian-Miller, Los Angeles

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