Shares of Iconix Brand Group Inc. dropped 62.3 percent after it was disclosed that Wal-Mart Stores Inc. won’t be renewing its DanskinNow license.
The license runs through January 2019. The transition of the brand could mean a decline in royalty revenue by $15.5 million in 2018, and Iconix forecasted that it would “unlikely be in compliance with certain of its financial debt covenants in 2018.” Danskin continues to be distributed to other retailers, such as Lord & Taylor, Costco and TJ Maxx.
On the agenda for the brand management firm is a review of options to raise capital to lower its debt. The company has already amended its term loan facility, a move that includes a reduction in the facility to $225 million from $300 million. Iconix said it has used $59 million from the original term loan facility to repay a portion of its 2018 convertible notes and accrued interest. The company also said the remaining balance of the term loan — $165.7 million — was restructured as a delayed draw term loan to refinance the 2018 convertible notes when they come due in March 2018, subject to certain conditions precedent.
Those conditions include the company raising additional funds in an aggregate amount of at least $100 million.
Iconix said: “The company continues to actively evaluate various capital raising options to repay debt as well as strategic alternatives, which could include the sale of certain assets or of the entire company.”
Shares of Iconix closed at $1.86 in Nasdaq trading.
Guggenheim Securities has been hired as the company’s financial adviser.
CL King analyst Steven L. Marotta has a “Neutral” rating on shares of Iconix. He noted that the reduction of the credit facility places the “effected retirement of the March 2018 convertible notes in jeopardy.” Options for a capital raise include a debt raise, equity raise or asset sale, or any combination of the three. While the sale of the entire company is a possibility, Marotta described that option as an “outlier event.”
Separately, Iconix said its premium athletic brand Starter is available exclusively on Amazon to its “tens of millions of Prime members.”