NEW YORK — Candie’s Inc. has a new financing deal in the form of intellectual property securitization, a still relatively underused concept in the fashion industry.
UCC Capital Corp. on Wednesday said it has completed an investment-grade, asset-backed securities transaction for Candie’s. The bonds, based on income stream and backed by Candie’s trademarks and licenses, are rated "Baa3" by Moody’s Investors Service and are self-liquidating over seven years. Proceeds will be used toward paying down debt and for working capital.
Neil Cole, president and chief executive officer of Candie’s, said in a statement: "We are extremely pleased to be able to complete this securitization of our intellectual property. This type of financing emphasizes the commercial strength of our powerful brands, improves our balance sheet and leaves additional availability to borrow against more traditional assets such as inventory and accounts receivable. This capital will provide a solid foundation to support our plans for growth."
Robert D’Loren, president and ceo of UCC Capital, told WWD in a telephone interview that the deal took about six months to pull together. An earlier attempt just before Sept. 11 was pulled because of market conditions.
D’Loren said: "One can expect more deals involving IP securitization now that the institutional investor is beginning to recognize the value of intellectual property." He expects to announce another completed deal for an apparel company shortly, but couldn’t provide additional information because of its classification as a private placement offering.
So far, the deals have been in the entertainment field, such as high-profile bond player David Bowie. The rocker sold $55 million of "A3"-rated, 15-year, 7.9 percent bonds to Prudential Investments in 1997 based on his existing catalog of music compositions.
According to D’Loren, the company’s trademarks and licenses, which secure the transaction, are placed into a "bankruptcy remote subsidiary" to preserve the collateral on the loan.
Bill Blass was the first fashion designer to float an investment-grade bond to finance the sale of his company in 1999. That deal was through D’Loren’s other company, CAK UCC, and the bonds are set to be paid off in 2009.
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