Kellwood Co. has bought itself a few more days of breathing room.
The apparel firm has reached an agreement to extend the maturity date of $140 million in notes until Friday at midnight. A deadline of midnight on Wednesday passed without a resolution.
In addition, the company reached a forbearance agreement with its lender. The agreement allows for the financing to stay in place so that a default on the notes wouldn’t trigger any covenants and jeopardize a shutdown of the loan facility.
Kellwood was thrown into crisis mode last Friday when Deutsche Bank, its largest noteholder, said it did not intend to support a proposed exchange offer.
Eric Hunter, Kellwood senior vice president for marketing and brand awareness, said the extension of the maturity date allows for “continued negotiations with Deutsche Bank.”
Deutsche Bank was an instrumental player in the negotiations to restructure the terms of the proposed note swap, which included an extension of the maturity to 2014 and almost twice the interest rate of the original note.
Sources familiar with the talks said they were not hopeful that Deutsche Bank would have a change of heart in its stance of nonsupport of the exchange offer.
Earlier this week, other sources said there was no reason for the bank to change its stance because it has credit insurance to cover any losses and therefore would not lose its investment should Kellwood be forced to file for bankruptcy.
Knowing it would recoup its loss, pushing for a bankruptcy would allow the bank to get its money now, as opposed to a promise of repayment down the road and the risk in the current economic environment that a later crisis might further delay repayment of the note.
A filing, however, would render the other noteholders in the position of unsecured creditors.
A bankruptcy filing, still a possibility, would be a blow to Sun Capital Partners. Its subsidiary, Sun Capital Securities Group, purchased Kellwood for $762 million in February 2008. After knocking out $100 million from its expense structure, the apparel firm has been operating at a profit, Hunter said.
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