Iconix Brand Group Inc. is getting some help as it seeks to pay off its 2.50 percent convertible senior subordinated notes due June 2016.
The news that the company would be able to pay off the debt, a concern that weighed on investors for several months, with a $300 million loan from Fortress Investment Group LLC sent the firm’s stock climbing Monday, up nearly 17 percent at press time (11 a.m. EST).
“We are pleased to have successfully secured this new capital, which shows the confidence that Fortress has in our underlying business,” said Iconix CFO Dave Jones in a release. “With the refinancing path for the 2016 converts now in place, we look forward to a continued focus on our core business; including the growth of our worldwide brand management platform.”
The new five-year senior secured term loan has an annual rate of LIBOR +10 percent per annum and will cost Iconix an additional $9 million in incremental interest expense and amortization in FY16. The company will provide updated guidance for 2016 when it reports its fourth quarter and full-year 2015 financial results, expected later this month.
“Considering the host of issues Iconix has faced in the last 18 months, including multiple C-suite changes, SEC review and a potential liquidity event (the looming $300 million June 2016 convertible), we view this as another hurdle cleared,” CL King & Associates analyst Steve Marotta wrote Monday. “A new CEO, the SEC review and the potential liquidity event are now in the rearview mirror. Still lingering, however, is a pending SEC investigation and consistent organic growth from legacy portfolio brands.”
The past year has been an uphill climb for Iconix, which tapped retail-industry veteran John Haugh for its CEO post last month, after a wave of controversy hit the brand management in 2015. Its founder and former CEO Neil Cole abruptly exited the company in August 2015 while an ongoing probe by the U.S. Securities and Exchange Commission led the firm to restate several years of earnings this past February.
In January 2016, musician Pharrell Williams repurchased Iconix’s 50 percent stake in his BBC Ice Cream LLC business, and earlier this month, Mark Badgley and James Mischka partnered with Titan Industries Inc. to repurchase the rights to their Badgley Mischka label.
The company expects the loan transaction to close within 30 days.