GFSI, Inc., the parent company to Gear for Sports, has commenced an exchange offer which see the company issue $134.9 million in 11% Senior Secured Notes due 2011 for all of its outstanding $125.0 million of principal amount of 9-5/8% Senior Subordinated Notes due 2007 and (ii) all of its outstanding $9.9 million of principal amount of 9-5/8% Senior Subordinated Notes due 2007.
Meanwhile, GFSI in October entered into a license agreement with Under Armour, Inc. to market decorated Under Armour garments in selected markets. The six year license agreement is for the GSFI's collegiate, golf and military retail sales channels. The company plans to commence product shipments in June 2006. Sales for the Under Armour brand are not expected to be significant in fiscal 2006. GSFI expects to incur marketing and preproduction costs starting in the second quarter of fiscal 2006. The company believes it may incur up to $500,000 in marketing and preproduction costs prior to the initial shipments of its Under Armour licensed products.
In connection with the exchange offer, GFSI is also soliciting consents from the holders of the Senior Subordinated Notes to approve certain amendments to the indentures under which the Senior Subordinated Notes were issued to eliminate substantially all of the restrictive covenants and certain events of default and related provisions in such indentures. The exchange offer and consent solicitation are subject to various conditions including the tenders for exchange by holders of at least 95% of the Senior Subordinated Notes, the execution of supplemental indentures containing the amendments for which consents were solicited, the receipt of the consent of GFSI's lenders under its existing revolving credit facility and the substantially simultaneous consummation of certain refinancing transactions involving GFSI's parent, GFSI Holdings, Inc.
Pursuant to the exchange offer, holders of the Senior Subordinated Notes that are both “qualified institutional buyers” and “accredited investors,” as defined in the rules under the Securities Act of 1933, as amended, may elect to exchange $1,000 in principal amount of Senior Subordinated Notes for $1,000 in principal amount of the Senior Secured Notes. Any holder that tenders its Senior Subordinated Notes pursuant to the exchange offer will also receive a cash payment in respect of all accrued and unpaid interest on the Senior Subordinated Notes through the initial settlement date of the exchange offer.
The exchange offer and consent solicitation commenced on December 7, 2005 and will expire at 5:00 P.M., New York City time, on January 5, 2006, unless extended. Holders of Senior Subordinated Notes cannot tender their Senior Subordinated Notes in the exchange offer without delivering their consents to the proposed amendments in the consent solicitation. Holders that validly tender (and do not withdraw) Senior Subordinated Notes in the exchange offer and validly deliver (and do not revoke) consents in the consent solicitation on or prior to the consent payment deadline, which is 5:00 P.M., New York City time on the later of (i) December 20, 2005 and (b) the first date on which each of the conditions to the exchange offer and consent solicitation are satisfied, will be entitled to receive the payment of a consent fee of $10 per $1,000 in principal amount of Senior Subordinated Notes tendered by such Holder. Tenders of Senior Subordinated Notes and deliveries of consents may be withdrawn at any time prior to the consent payment deadline.
