NEW YORK — The Donna Karan Co. has put its financial house in order with a 4 1/4-year, $125 million bank credit facility.
The arrangement replaces an existing $110 million, 18-month line.
Completion of the deal was announced Monday, confirming a story in Monday’s WWD that the company had received an increased bank line.
The new facility is made up of a $50 million term loan and a $75 million revolving line of credit. Interest is linked to the London Interbank Offering Rate or the prime rate, at the company’s option.
Stephan Weiss, co-chief executive officer of the company, said the bank arrangement provides adequate financing based on the company’s expansion plans over the period of the loan.
Asked whether the bank arrangement precludes the need for a private placement, he said: “There is no pressing need to go to the capital markets for additional funds. Our financing is in place for the foreseeable future.”
He noted that the loan arrangement with five banks led by Citibank, “clearly demonstrates that the financial institutions believe in our company, its management and the direction it is taking.”
In the announcement, Weiss noted that in the third quarter, the company “achieved the highest quarterly sales and operating profit in the company’s history.”
Asked in a telephone interview to be more specific, Weiss declined, stating that he preferred to “keep the business private.” He conceded that the company previously released some figures, “but that was done only because of the tremendous amount of misinformation being circulated about our numbers.”
In the statement, Weiss said the record performance reflects strong demand for Donna Karan’s product lines. International sales have continued to accelerate, with sales balanced between collections and DKNY, both men’s and women’s apparel.
Sales of shoe lines have grown rapidly since shoes shifted from a license to a company-owned business, according to the statement. There have been substantial revenue increases in DKNY Jeans and Petites, the statement continued, adding that the beauty business has outperformed expectations.
Brenda Cotsen, Citibank vice president, said the performance of the Karan company has been strong all year. “The only issue was a round of bad publicity last year,” she said.
The bank arrangement caps months of speculation concerning financing for the firm after the withdrawal late last year of a planned public offering. This spring, the firm was exploring a possible $75 million private placement. However, that was delayed because of an explosive suit brought by a former chief financial officer charging that the company was being financially mismanaged. The company denied the charges and the suit remains unresolved.
— Fairchild News Service

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