Steve Madden Files Restructuring Agreement with Betsey Johnson

Steven Madden Ltd. has acquired nearly all of Betsey Johnson’s assets in a deal that forgives the loan it purchased from the brand’s creditors last month.


The Long Island City, N.Y.-based footwear and accessories manufacturer now controls “substantially all trademarks, service marks, trade dress, brand names, logos, trade names, business names, patents, copyrights, domain names, software, know how and other intellectual property, and all goodwill associated with BJ LLC … and certain intellectual property licenses including the right to receive royalties and other income” from the brand, said its filing with the Securities and Exchange Commission on Friday.


Madden last month said it would pay $27.6 million for a $48.8 million loan owed by designer Betsey Johnson’s eponymous company. The loan was then in default.


As part of the restructuring agreement, signed on Oct. 5, Madden took a 10 percent equity stake in Betsey Johnson in exchange for a $200,000 credit against the outstanding balance of the original loan.


The original loan of $50 million was made on Aug. 20, 2007 by Paradox Capital in support of Castanea Partners’ acquisition of a majority stake in the company’s apparel business, and was collateralized mainly against the company’s intellectual property.


Castanea Partners, which remain the majority owners of Betsey Johnson, invested “additional capital” of an unidentified amount into the company, according to the filing.


Simultaenously, Madden made a new $3 million loan to Betsey Johnson — at the rate of 8 percent per annum — that will mature on December 31, 2015. The filing noted that “an early repayment of the new loan is required” should it happen that the firm is sold, launches an IPO or ceases business.


Also this week, Betsey Johnson’s long-time CEO Chantal Bacon left the company, and Susan Falk has been named as a replacement.


Madden has been a licensee for Betsey Johnson’s handbags, small leather goods, belts and umbrellas. Madden told WWD the goal now is to make footwear 30 percent of the brand’s total sales within the next 12 months.


Madden’s chairman and CEO, Edward Rosenfeld, said in a statement that the addition of the brand “offers meaningful growth opportunity” for the company.


The transaction is expected to add about 10 cents to the company’s earnings per share next year. Last year it earned $2.73 a share.


Madden’s stock has risen 60 percent so far this year, and stands at $44.00 as of press time.

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