Claire’s Stores today announced it has extended its offer to exchange its second-lien and unsecured debt until midnight EDT today after the company late last month sweetened the terms for investors. The offer originally was set to expire at midnight EDT yesterday.
As of Sept. 12, approximately $333 million of the notes had been tendered, up from $300 million at the end of August, the company said in a statement today. Regardless of the extension, the recent amendment to the exchange offer would ensure that the minimum required $400 million threshold for the tender would be met with participation from the “affiliated holder exchange,” including funds managed by Apollo and Claire’s Inc.
As reported, the struggling teen accessories retailer is proposing to exchange any and all of its $450 million of 8.875% senior secured second-lien notes due 2019, $320 million of 7.75% senior notes due 2020, and $260 million of 10.5% senior subordinated notes due 2017 for up to $40 million of new Claire’s Stores term loans maturing in 2021, up to $130 million of new senior secured term loans maturing 2021 of newly formed subsidiary CLSIP, and up to $60 million of new senior term loans maturing 2021 of Claire’s (Gibraltar) Holdings, a holding company of its European operations.
In the event that the tender offer is not fully subscribed, the amendment calls for holders of second-lien notes and unsecured notes to receive additional term loans of up to $83.64 and $21.36, respectively, per $1,000 of notes tendered. All term loans held by the affiliated holders will be pay-in-kind.
As reported, market sources questioned the motive behind Claire’s Stores’ sudden transparency when it pre-released weak second-quarter results in late July, given that the retailer had never pre-released its results before. The subsequent drop in the company’s bond prices further fueled speculation that news of the deterioration of the company’s results was disclosed in part to push its bonds lower in an effort to put pressure on bondholders and facilitate an exchange at the lowest possible price, sources said.
Claire’s sponsor Apollo Global Management has been taking steps to address the company’s more pressing 2017 debt maturity. The retailer earlier this year entered into an agreement with funds managed by affiliates of Apollo to swap out $174.4 million of its existing $259.6 million of 10.5% senior subordinated notes due 2017 for $174.4 million of new 10.5% PIK subordinated notes due 2017.
The agreement came after the company’s equity sponsor acquired a significant portion of the existing debt through open market purchases, a move that would potentially give Apollo a greater position around the bargaining table in the event of a restructuring.
Claire’s recently warned that its options with respect to addressing the 2017 maturities might, in part, “be based on Apollo’s willingness to PIK those notes.” Apollo and its holding companies own 90% of the new notes, filings show.
Hoffman Estates, Ill.–based Claire’s Stores operates as a specialty retailer of fashionable jewelry and accessories for young women, teens, and children worldwide. The company was taken private by Apollo Management in early 2007 for roughly $3.3 billion. Ratings are CC/Caa3, with negative outlooks on both sides. — Rachelle Kakouris
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