NEW YORK — Oscar de la Renta has new asset-backed financing that the company is earmarking to strengthen its U.S. business.
The amount of the loan was not disclosed, but it is a financing arrangement backed more by the designer’s intellectual property assets than inventory and receivables, according to the agent handling the deal.
Alex Bolen, who succeeded de la Renta as chief executive of the firm in July, said the “multimillion-dollar” financing will allow the company to boost its domestic business, especially with Neiman Marcus, Bergdorf Goodman and Saks Fifth Avenue — a priority Bolen has emphasized in recent months.
Bolen described the financing as “a plain vanilla revolving credit facility.” For now, the bulk of the financing will go to building the U.S. business on several levels — from buying fabric to anything else that will enhance sales, said Bolen, adding, “It’s good timing.”
Typically, financing structures by asset-based lenders rely mostly on inventory and receivables as collateral for loans. While there may be an intellectual property component, it is not as common.
In the de la Renta financing, according to Robert D’Loren, president and ceo of UCC Capital Corp., who facilitated the deal, the intellectual property component allowed de le Renta to get a much higher dollar amount for the loan than if just inventory and receivables were used.
UCC specializes in financing deals backed by intellectual property assets such as trademarks.
In most cases, revenue streams connected with intellectual property, such as licensing deals, are earmarked as funds used to repay the loan. Intellectual property financing structures are less risky to the lender because there are fewer changes to valuation compared with inventory financing facilities.
While D’Loren declined to disclose details about the loan, it is likely that the working capital facility arranged by UCC through a private institutional investor is less costly for Oscar. Most apparel firms are left with few options when it comes to financing alternatives. One such option is mezzanine financing, where lenders require at least a 22 to 30 percent rate of return.
Sources said Oscar de la Renta generates annual retail sales of $650 million, including about 23 licensed products. That includes about $100 million from its collection business. International sales only account for 10 percent of the total business, a percentage company executives are determined to bolster in the next few years.
Next month, the designer plans to open his first freestanding store, a 3,000-square-foot space at 772 Madison Avenue. The Upper East Side site will give the firm a better sense of the demand for freestanding stores.
Within the next three or four years, the company aims to have four or five stores in the U.S. A second store is scheduled to open at the Wynn Resort in Las Vegas in April, and negotiations for a third site in Bal Harbour, Fla., are reportedly nearing completion. The designer is said to be interested in West Coast sites as well.
This fall, O Oscar, a new moderate line of women’s apparel licensed to the Kellwood Co., bowed, as did Rosamor, the designer’s seventh fragrance, and Oscar by Oscar de la Renta outerwear, which is licensed to Fleet Street. The company also is rolling out an expanded line of home furnishings, including china, glassware, linens, flatware, mattresses and rugs.
The company is said to be pursuing a few new categories including more accessories, O Oscar men’s wear and possibly women’s bridge sportswear.
As the U.S. business increases, international sales should follow, Bolen said. “As the business expands overseas, we will have to expand our credit facility,” he said.
Asked if the company plans to go public, Bolen said, “We have no plans to, but I can’t rule it out in the future. We’re happy being a private company.”