While BCBG Max Azria Group Inc. is negotiating new debt agreements, its vendors and creditors are waiting.
This story first appeared in the May 27, 2011 issue of WWD. Subscribe Today.
The fashion firm, with interests ranging from mass to luxury, is at work on a deal to refinance its debt and untangle a web of interconnected financial arrangements, leaving vendors and creditors wondering when they’ll be receiving payments.
Credit sources told WWD the firm has been slow in paying creditors, with some invoices unpaid since February. And last week, the fashion house told creditors BCBG had “suspended” all payments pending completion of new financing arrangements, according to one credit contact. Some creditors this week were told the deal is due to be completed by June 14 but that BCBG couldn’t confirm when payments would be made to creditors or whether they would even be paid in full by the end of June.
One financial source said a budget would be formulated before BCBG could determine who will receive money and just how much.
BCBG has been trying to complete a deal to secure a new $230 million term loan to refinance a portion of its debt. A $94 million first-lien term loan comes due on Aug. 10, but that date would be moved up to June 16 if the $230 million term loan isn’t completed. If and when it’s refinanced, its maturity would extend until 2015. The company hopes to complete the refinancing by June 14, in advance of the deadline.
According to credit sources, BCBG last August refinanced a $460 million asset-based loan through 2014. However, the ABL requires a “timely” refinancing of its first-lien term loan.
Goldman Sachs is said to be working on the proposed financing.
BCBG did not respond to requests for comment. BCBG’S public relations representative sent out an e-mail Thursday saying she had resigned.
On May 6, credit ratings agency Standard & Poor’s said BCBG was refinancing its first- and second-lien debt to extend the maturities and improve liquidity.
S&P gave the proposed senior secured first-lien term loan a rating of “B-minus,” six ticks below investment grade, and raised BCBG’s corporate credit rating to “B-minus” from “CCC-plus.” While risky, a rating in the “B” family indicates that the debtor has the capacity to repay its obligations.
On May 9, Moody’s Investors Service, another ratings agency, assigned a “B2” rating to the proposed $230 million term loan. It said “completion of the proposed refinancing is critical to the ongoing viability of the company.”
BCBG is also working on amending and extending its $229 million second-lien term loan held by affiliates of Guggenheim Partners.
Max Azria, the Tunisian-born chairman, chief executive officer and founder of BCBG, in 2006 hired Goldman Sachs and Citigroup as financial advisers to explore taking the firm public. At the time, the company already had French fashion house Hervé Léger and Spanish chain Don Algodón under its umbrella. It also had just acquired the Max Rave chain, which it closed in January.
While the initial public offering failed to materialize, Azria has been busy building up his fashion empire even with a worsening cash crunch.
In 2006 the firm acquired French retail chain Alain Manoukian. A 2006 deal to sell ready-to-wear line Tex by Max Azria at Carrefour fizzled in 2009 following a poor sales performance. A Miley Cyrus line was launched as an exclusive at Wal-Mart in 2009, although Moody’s suggested the line was not performing well when it stated “consolidated revenues are expected to decline in the near term due to deteriorating volumes in BCBG’s mass market segment.”
Late last year, BCBG partnered with Berggruen Holdings to buy bankrupt German department store chain Karstadt.