The filing also reiterated that Perry Ellis, having received a competing offer from Randa Accessories Leather Goods, is sticking to its plan to move ahead with the planned merger. Separately, Perry Ellis said it was filing a preliminary Proxy Statement with the SEC, all of which is connected to a special meeting of shareholders to vote on the proposed merger. The deal needs to be approved by a majority of disinterested shareholders — those not connected to Feldenkreis.
While the filing details the financing arrangements for the deal, it also calls for a series of subcompanies that will hold different parts of the business, essentially turning each component into its own “silo.”
For example, a passive holding company will own another entity whose purpose is to hold the equity interest of an intellectual property holding company. The latter entity will own all the IP assets and rights of the merged entity. A separate operating company will be the passive holding company of another entity that holds the equity interest of the operating division. And a third passive holding company will be the parent of an entity whose sole purpose is to own the equity interests of the real estate assets. Together, all three holding companies will be owned by a passive holding firm whose sole role is to own the three different silos.
What that means, at least for the IP assets, is that the entity that owns the IP will then license the IP assets to the operating silo. The operating silo will then pay the IP silo an annual license fee of $10 million, but that balloons to $20 million if there is a subsequent change of control matter later on. The installments are to be paid quarterly in advance.
In practical terms, the company has been separated out so components of the business become the backup assets — think of them as collateral — for the different financing groups in case the loans can’t be repaid down the road.
As first reported by WWD, Feldenkreis has a commitment from Fortress Credit Advisors to help fund the deal.
Total funding for the transaction includes a $140 million senior secured first lien term loan, a $95 million senior subordinated secured second lien term loan, a $47 million million senior secured bridge term loan facility secured by real estate assets, and a $275 million asset-based borrowing loan facility.