Iconix Brand Group Inc., the parent of Starter, Umbro and Danskin, slightly reduced its earnings guidance as it reached an deal to repurchase a portion of our outstanding convertible notes.
Iconix said it has entered into separate, privately negotiated exchange agreements with certain holders of approximately $105 million in principal amount of the company’s outstanding 1.50 percent convertible senior subordinated notes due March 2018.
Prior to these transactions, the principal amount of the notes outstanding was $400 million. Pursuant to these agreements, the company may retire up to approximately $105 million in aggregate principal amount of the notes in exchange for aggregate cash payments of up to approximately $35.2 million, and approximately 6.8 million shares.
Dave Jones, CFO of Iconix, commented, “We are very pleased to have negotiated the opportunistic repurchase of a portion of our outstanding convertible notes at what we believe to be an attractive discount. Given the repurchase price of the notes, we were able to retire a future debt obligation for significantly less than its face amount. This debt reduction, combined with the issuance of equity, allows us to enhance our financial flexibility and fulfills one of our principal goals of proactively reducing our leverage over time. We believe these transactions improve our ability to create long-term shareholder value.”
To reflect the additional shares issued in this transaction, the financing fees and the interest savings, the company is revising down its 2016 GAAP diluted EPS guidance by 4 cents a share to a range of 71 to 86 cents a share, and its non-GAAP diluted EPS guidance by 9 cents to a range of $1.06 to $1.21.
This revision is based on the company’s estimates and is subject to adjustment for the final number of the shares issued at the end of the term of the agreement. The revision does not reflect a potential gain or loss on the repurchase of the notes at a discount.
Iconix’s sports-related brands include Starter, Umbro, Ocean Pacific, Danskin and Pony. Iconix also owns Candie’s, Bongo, Joe Boxer, Rampage, Mudd, Mossimo, London Fog, Rocawear, Cannon, Royal Velvet, Fieldcrest, Charisma, Waverly, Zoo York, Sharper Image, Lee Cooper, Ecko Unltd. and Marc Ecko. In addition, Iconix owns interests in the Artful Dodger, Material Girl, Peanuts, Ed Hardy, Truth Or Dare, Billionaire Boys Club, Ice Cream, Modern Amusement, Buffalo and Nick Graham.
Photo courtesy Starter