Tandy Brands Accessories Inc. has secured new financing to replace its frequently extended credit facility with Wells Fargo Bank, due to expire on Wednesday.
This story first appeared in the July 29, 2013 issue of WWD. Subscribe Today.
The Dallas-based accessories business, which fell out of compliance with the profitability requirements of its Wells Fargo facility after a difficult holiday season in its gifts business, received $29 million in senior financing from Salus Capital Partners, $27.5 million of it in a revolving credit package. An additional $11.5 million came from King Trade Capital and is earmarked for the purchase of inventory related to the problematic holiday season in gifts.
The financing was secured through the company’s assets, with Salus holding a first-priority lien on everything but the gifts merchandise financed through King.
The company didn’t specify the interest percentages attached to the two lines of credit. However, Rod McGeachy, president and chief executive officer, said the firm achieved its goal of putting its capital structure into a better position without hurting its shareholders.
“What we wanted to avoid was any equity dilution of our current shareholders,” he told WWD Friday. “It was important to us that the deal didn’t have an equity component, and it gave us the incremental liquidity we needed to move forward.”
Shares of Tandy Friday closed at 72 cents, up 7 cents or 10 percent. They’d fallen as low as 38 cents on April 17 after Tandy disclosed that it had fallen out of compliance with the terms of its Wells Fargo loan. It said in March it would streamline its facilities and cut nearly a third of its workforce.
Concurrently, the company ended its four-month relationship with Deloitte Financial Advisory Services and eliminated the position of chief restructuring officer that had been held during that period by John Little of Deloitte’s Dallas office.
“The reductions have been completed, and we can go forward remaining focused on our portfolio of brands,” McGeachy said. “In gifts, we’ll be servicing fewer customers with a more streamlined product offering. And we’ll have more aggressive pricing to replace traditional end-of-season return privileges.”
He said Tandy had “effectively reduced the risk associated with our gifts business and [we] believe the profitability of this segment will be greatly improved in fiscal 2014.”
In the third quarter ended March 31, Tandy had a net loss of $8.5 million as sales slipped 17.9 percent to $19.6 million. The loss included pretax charges of $5.6 million to cover restructuring and impairment.
Since being founded in 2011, Salus has provided financing for W Diamond, Kitson and bankrupt Bakers Footwear Group, among others.