Joe’s Jeans Inc. has failed to meet the terms of the forbearance agreements provided to it by Garrison Loan Management and CIT Commercial Services earlier this month.

Joe’s said in a regulatory filing with the Securities and Exchange Commission Wednesday that the two creditors, who provided financing for Joe’s October 2013 acquisition of Hudson Jeans, had informed the Los Angeles-based jeans firm that it had missed the deadlines established in forbearance agreements for progress in the sale/recapitalization process.

Joe’s fell out of compliance with the profitability requirements of Garrison’s term loan last year, triggering an automatic default with CIT, which holds Joe’s revolving credit agreement.

Joe’s has been forced to increase its interest payments to the two creditors to a higher rate since the default event last October and they were raised again when the forbearance agreements were signed.

Joe’s has been working with Carl Marks & Co. to explore various strategic alternatives. Peter Kim, chief executive officer of Hudson Clothing, resigned from Joe’s board and has been working with B. Riley & Co. as financial counsel and with Sullivan & Cromwell LLP as his legal adviser in a review of his options. Payments on convertible notes issued to Kim and his fellow investors in Hudson have been suspended since the first default. Kim holds $14.3 million of the notes.

Kim declined to comment.

Under the forbearance agreements, the lenders have agreed not to take action against Joe’s until Oct. 15. Joe’s will be obliged to pay Garrison $450,000 on that date.

As of May 31, Joe’s had a cash balance of $828,000 in addition to a $59.1 million on its term loan with Garrison and an outstanding balance of $20.8 million on its revolver.

load comments
blog comments powered by Disqus