J. Crew Group Inc., in a big step toward improving its balance sheet, has received consents from a majority of lenders for the term loan amendment announced June 12.

The company said Friday it received consents from holders representing more than 80 percent of the term loan, exceeding the threshold for approval.

The term loan amendment was announced in connection with the offer to exchange any or all of the outstanding $566.5 million aggregate principal amount of senior payment-in-kind toggle notes due 2019 issued by Chinos Intermediate Holdings, A Inc., an indirect parent company of the company.

With the requisite consents for the amendment received, litigation by lenders regarding the company’s intellectual property that had been transferred to a subsidiary last year has ended.

As previously announced, the company views the term loan amendment and exchange offering as “strategically important to its overall effort in positioning the company for long-term success. Addressing the nearest-term maturity removes an overhang in a challenging market environment and provides the company a clear and more confident path to execute its business plan.” The restructuring of debt wipes out near-term maturities.

The term loan of $1.5 billion represents the biggest part of J. Crew’s debt load of $2.1 billion.

Earlier this month, Millard “Mickey” Drexler announced he would be stepping down as chief executive officer and be succeeded by James Brett, president of the West Elm specialty home division of Williams-Sonoma Inc. The change takes place in mid-July. Drexler will continue as chairman. Fixing the balance sheet gives Brett a far greater chance of succeeding turning around the J. Crew Group operations, while diluting the holdings of the owners. Drexler, along with TPG Capital and Leonard Green & Partners, took J. Crew private in a $3 billion deal in 2011.

J. Crew is looking to finalize in about a month a private exchange offer that would have affiliates of the company offer to buy all the outstanding PIK notes for $250 million in new secured notes backed up by the 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 at more than two-thirds of the PIK notes have already signed on to the exchange, which requires 95 percent buy-in to be approved.

load comments
blog comments powered by Disqus