After close to a year of mulling strategic options, Frederick’s of Hollywood Group Inc. has closed a deal with Five Island Assets Management that will infuse significant capital into the lingerie retailer’s infrastructure.
The company sold $10 million worth of its convertible preferred stock to Five Island Assets, a subsidiary of investment firm Harbinger Group Inc. The preferred stock is convertible into 40 million shares of the company’s common stock at a conversion price of 25 cents a share. It carries a 9 percent dividend, or is payable in additional shares of Series B preferred stock at an annual rate of 12 percent.
Upon full conversion of the preferred stock, Five Island Assets will own a majority of the Frederick’s common stock and be entitled to appoint a majority of the company’s board of directors in the coming weeks. Further details were not available.
The structure of the deal means Five Island Assets can continue to boost its stake in the legendary lingerie company. Frederick’s also issued warrants to Five Island Assets to acquire up to 10,246,477 shares of common stock at prices ranging from 1 cent to $1.21 a share.
Thomas Lynch, chairman and chief executive officer of Frederick’s, said the $10 million cash infusion will “play an important role in stabilizing our business and will allow us to improve sales by maintaining appropriate inventory levels.”
“We are excited to have received this vote of confidence from Five Island Asset Management, as they share the same long-term vision of what Frederick’s of Hollywood means to the market. We are looking forward to sharing that vision with our current and future customers domestically and internationally,” said Lynch.
The deal follows a range of strategic alternatives explored by Frederick’s, including an outright sale of the company and a business combination, after it hired investment bank Allen & Co. in May 2012. Frederick’s sold $5 million of convertible preferred stock to TTG Apparel, an investment firm run by Michael Tokarz, in May 2012. At the time, Frederick’s planned to use the $5 million it raised to pay vendors a portion of their accounts payable and, in turn, receive about $4.9 million in markdown allowances.
Frederick’s has increasingly been testing new product categories to bolster its brand name. Last fall Frederick’s entered into a collaboration with model Beverly Johnson to launch a luxury line of beauty, body and hair care products under the Beverly Johnson Luxurious Lifestyle brand. The lingerie specialist, which mails out 5.5 million catalogues four times a year, also gave its catalogue a redo and launched its first luxury label, called Harriet. The collection of upscale silk and lace lingerie and sleepwear was named after the wife of the late founder of Frederick’s, Frederick Mellinger, whose risqué black lingerie and luxe looks from the silver screen in the Forties were designed for his longtime muse, Harriet.
From overseeing America’s fastest-growing speciality retailers to codifying cool, WWD talked to the women who are leading the way for the future of beauty. Check out our Instagram Stories to see how these women built today and are creating tomorrow. (📸: @hannah_khymych) #wwdbeauty
For @laperlalingerie's spring 2018 show, the brand chose to host their event at @thevenetianmacao. With Chinese megastars @bingbing_fan and @hubing in attendance, La Perla debuted a rock ‘n’ roll-inspired collection. The show marked the start of Sands Macao Fashion Week, which runs from October 19 to 24 — the city’s first such event. Pictured here are models backstage with glimmering eyes. #wwdfashion (📷: Cheuk-Yin To)
Trending for spring 2018: top stitch design. Gone are the days of stitch just for seams — designers are using the once-minimal detail to create strong decorative elements. (📷: Paola Testa; Styled by @andrew_shang) #wwdfashion
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)