The company, which is also reporting first-quarter results this afternoon and updating investors on its strategy on a conference call, is launching an exchange offer for its $566.5 million in PIK, or payment in kind, notes due in May 2019 and a separate effort to amend its term loan. The transactions could be done in about a month and already have the buy-in from a significant percentage of debt holders, but are not yet a done deal.
If the transactions are accepted by shareholders, Brett, who starts July 10, could take the helm with no significant debt maturities before 2021, giving him enough time and wiggle room to shape the company’s turnaround.
Brett, who most recently was president of Williams-Sonoma Inc.’s hot West Elm unit, is taking over the business from Millard “Mickey” Drexler, who will remain chairman. Drexler along with TPG Capital and Leonard Green & Partners took J. Crew private in a $3 billion deal in 2011.
The private exchange offer would have affiliates of the company offer to buy all the outstanding PIK notes for $250 million in new secured notes backed up by a subsidiary holding most of the intellectual property tied to the J. Crew name, as well as $190 million in new preferred stock issued by the retailer’s corporate parent and 15 percent of the firm’s common stock.
Separately, the plan calls for holders of the term loan, which is trading at about 70 cents on the dollar, to receive a $150 million payment at par as well as some adjustments.
Investors holding 67 percent of the PIK notes have already signed on to the exchange, which requires 95 percent buy-in to be approved. And investors holding 28 percent of the term loan have already agreed to that part of the plan, which requires just over 50 percent buy-in to fall into place.
The plan would also end the litigation in New York State court that started this year after investors started agitating against the company’s move to place most of its trademark in a separate subsidiary.
All together, the plan would dilute the holdings of the current owners, but also give the company some much-needed breathing room.
More from WWD: