Iconix Brand Group Inc. announced several important developments including the wind down of the DanskinNow brand at Walmart, the amendment of its senior secured term loan, a new exclusive Starter collection on Amazon, and the dismissal of pending securities class action lawsuits previously filed against the company and certain of its current and former officers and directors.
Recent Developments
The company announced that it has been informed by Walmart that the DanskinNow license, which is a diffusion of the Danskin brand, will not be renewed beyond January 2019. As a result, royalty revenue for the Danskin brand is estimated to decline approximately $15.5 million in 2018. Danskin, which is one of the most trusted brands for women’s fitness apparel, will continue to be distributed to leading retailers including Lord & Taylor, Costco and TJMaxx. Longer term, the transition out of Walmart provides the opportunity to relaunch and expand the core Danskin brand in other venues.
Due to certain developments, including the transition of the Danskin brand, the company forecasted that it would unlikely be in compliance with certain of its financial debt covenants in 2018. As a result, the company recently engaged in discussions with its lenders to provide relief under its financial debt covenants and entered into an amendment of its senior secured term loan facility. As part of those negotiations, the company agreed to reduce the size of the credit facility by approximately $75 million to $225 million. Prior to entering into the amendment, the company had already used $59 million of the escrowed proceeds made available under the original term loan facility to repay a portion of its 2018 convertible notes and accrued interest. The remaining balance of $165.7 million was restructured as a delayed draw term loan to be utilized to refinance the company’s 2018 convertible notes when they come due in March 2018, subject to satisfaction of certain conditions precedent, including the raising of 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, as further described in the company’s Form 8-K filed today. The new arrangement will result in near term interest savings for the company as the undrawn amounts are subject to a 4 percent ticking fee rather than the higher marginal interest rate under the original term loan facility.
As part of its ongoing efforts to strengthen its balance sheet, which included the sale of selected assets and the repayment of certain outstanding debt, the company continues to actively evaluate various capital raising options to repay debt as well as strategic alternatives, which could include the sale of certain assets or of the entire company. Iconix is working with Guggenheim Securities, LLC as its financial advisor in connection with these efforts.
In a separate release, the company also announced that Starter, the iconic premium athletic brand, is now available on Amazon exclusively to tens of millions of Prime members at www.amazon.com/starter. This new distribution, follows the company’s third quarter 2017 announcement that Starter was no longer exclusive to Walmart.
John Haugh, CEO of Iconix, commented, “Improving the balance sheet, enhancing our liquidity position, and more actively managing our brands continues to be our primary focus. With our announcement today of Starter at Amazon, we are demonstrating our ability to successfully reposition our brands. We expect this launch will return Starter to its iconic position of a leading premium athletic brand. Our team will be pursuing similar strategies as we reposition and build our Mossimo and Danskin brands. With respect to the balance sheet, we entered into an amendment of our existing credit facility and will be focused on generating funds in the near term to enhance our liquidity position. We are committed to continue to take all appropriate actions that we believe are in the best interest of Iconix and its shareholders. You can find a full description of the details of the credit agreement amendment in the Form 8-K that was filed today.”
Iconix’s lineup of brands include Candie’s, Bongo, Joe Boxer, Rampage, Mudd, Mossimo, London Fog, Ocean Pacific, Danskin, Rocawear, Cannon, Royal Velvet, Fieldcrest, Charisma, Starter, Waverly, Zoo York, Umbro, Lee Cooper, Ecko Unltd., Marc Ecko and Artful Dodger. In addition, Iconix owns interests in The Material Girl, Ed Hardy, Truth Or Dare, Modern Amusement and Buffalo.
