Joe’s Jeans defaulted on a $60 million term loan and will begin paying default interest of 14%, instead of 12%.
Garrison Loan Agency Service is the agent. The default, on Nov. 6, stems from the company failing to meet the minimum-EBITDA covenant for the 12 months ended Sept. 30.
As a result of the term loan default, the company defaulted on a revolving credit agreement and a factoring facility with CIT Commercial Services. The company owes $33.9 million under the RC, and has availability of $13.7 million, including the factoring facility, as of Sept. 30.
Management is in talks with Garrison and CIT over amendments and default waivers. Without a waiver, lenders could accelerate repayment, possibly triggering a bankruptcy, an SEC filing today said.
In the nine months ended Aug. 31, the company generated net income of $276 million, versus a net loss of $287 million in the same period a year earlier.
In September 2013, CIT Capital Markets and Garrison Investment Group provided $110 million in debt financing to Joe’s Jeans to back the $97.6 million acquisition of Hudson Clothing from Fireman Capital Partners, Webster Capital, and management.
The financing includes a $60 million, five-year term loan and an up to $50 million, five-year borrowing-based revolver. At syndication, the bulk of the RC was priced at L+250, while a $1 million RC-1 sliver was priced at L+350. The RC is subject to a 50 bps call in year two if Joe’s Jeans terminates the RC commitment.
At syndication the five-year term loan was priced at L+1,075 and callable at 103, 102, and 101, according to the filing. The loan is subject to fixed-charge and leverage ratios, and an EBITDA minimum.
In addition to the acquisition, proceeds funded fees and expenses, working capital and general corporate purposes. Joe’s Jeans also issued $32.4 million of convertible notes to the sellers as part of the deal.
Los Angeles-based Joe’s Jeans designs, sources and distributes branded apparel products to over 1,200 retail locations in the U.S. and abroad. The company’s shares trade on the Nasdaq under the ticker JOEZ. – Abby Latour