Broder Bros. Co. warned that if it doesn't get most of its noteholders to accept an offer to swap old debt for new debt plus stock, it will be forced to file a Chapter 11 bankruptcy petition. The Trevose, Pa., apparel distributer launched an exchange offer on April 17 for all its outstanding $225 million in senior notes due next year that promises noteholders new notes and newly issued common stock. The move aims to help the company reduce its leverage, extend the debt's maturity date and enhance its near-term liquidity.
Specifically, Broder Bros. proposes to exchange the outstanding 11.25% senior notes, due Oct. 1, 2010, for newly issued 12%/15% senior payment-in-kind toggle notes due 2013 and a pro-rata share of its newly issued common stock.
In a statement released last Monday, Broder Bros. said, “If the company fails to secure the participation of at least 98% of the old notes or does not consummate the exchange offer for any reason, it intends to initiate a restructuring through the filing of a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code.”
That common stock is subject to dilution, Broder Bros. said, upon existing stockholders' exercising their warrants or the exercise of stock options that will be issued under a new management equity-incentive plan.
Broder Bros. said that for each $1,000 in old notes, noteholders will get $444.44 in new exchange notes and their share of no less than 95% of the newly issued common stock.
The exchange offer expires on May 14 unless the company terminates or extends the offer.
