ICON recent 8K reports they need to raise $100M by March 2018 to avoid violating debt covenants -
8K of 10/30 -
Following the recent decision by Walmart not to renew its DanskinNow license agreement with the Company which expires in January 2019, recent decisions by other retailers not to renew their existing license agreements with the Company, including Target with respect to the Mossimo brand, and expected modest diminished revenues in 2018 across several of the Company’s other brands, the Company has re-evaluated its short-term and long-term liquidity needs. Based on revised financial forecasts, the Company determined that it was unlikely that it would be able to satisfy the conditions precedent under the Credit Agreement for the release of the remaining $240 million on deposit in the Escrow Account to repay the Company’s 1.50% convertible senior subordinated notes due March 2018 (the “2018 Notes”) when they become due in March 2018. Such conditions, included, among other things, the
Company’s satisfaction of a minimum asset coverage ratio of 1.25:1.00 and a senior secured leverage ratio of no greater than 4.50:1.00. Approximately $59 million of the initial $300 million of escrow funds had been previously used by the Company to repurchase outstanding 2018 Notes and accrued interest and there currently remains outstanding approximately $236 million in principal amount of 2018 Notes.
In order to address these concerns and provide the Company with greater flexibility to raise the capital needed to address both the near-term maturity of the 2018 Notes and the Company’s ongoing liquidity needs, the Company engaged in discussions with its Lenders and entered into the Amendment (as described above) which, as noted, provides for, among other things, (A) the release of the remaining funds in escrow to Deutsche Bank, the current senior secured lender, (B) the establishment of the Delayed Draw Term Loan Facility and (C) the loosening of the financial maintenance covenants under the Credit Agreement.
Conditions to the availability of the Second Delayed Draw Term Loan include (i) the Company raising additional funds through various sources (and/or achieving a reduction in the outstanding principal amount of the 2018 Notes) in an aggregate amount of at least $100 million to repay the 2018 Notes and provide at least $25 million of additional cash to enhance liquidity and be used for general corporate purposes, (ii) the Company being in financial covenant compliance, on a pro forma basis as of the time of the requested borrowing and on a projected basis for the succeeding 12 months, and (iii) there not existing a Default or Event of Default as of the time of the borrowing. The Company is actively evaluating and pursuing various capital raising transactions, including the sale of selected assets consistent with the Company’s ongoing efforts to strengthen its balance sheet, debt and equity financings or any combination of the foregoing, as well as other strategic alternatives, which could include the sale of the Company.
The Company’s ability to sell assets or raise additional capital will depend on various factors, including prevailing market conditions. There can be no assurance that the Company will be able to engage in asset sales, refinance its existing debt or raise additional capital and, if so, whether any such transactions would produce sufficient funds or be on acceptable terms. See “Supplemental Risk Factors” below in this Current Report on Form 8-K.