LevFin Insights: J. Crew says amendment wins lender approval; TL remains in low 60s

J. Crew Group announced late this afternoon that it had received consents from holders representing more than 80% of the approximately $1.5 billion term loan for its amendment request, according to a company statement.

As reported, the company earlier in the day accelerated the deadline on the loan to 1 p.m. ET today, from 5 p.m. ET, a move it said was “based on the support” it had received to date. As reported, the TLB due 2021 (L+300, 1% floor) extended losses on that news, drifting down into the low 60s. The paper was quoted at 61.5–63 this afternoon as press reports circulated that the amendment had passed, which is down about two points from the end of the day yesterday and roughly seven points from prior to the launch of the amendment and coordinated exchange offer.

As reported, the retailer earlier this week approached its lenders for an amendment alongside it proposed exchange offer to holders of its PIK toggle notes, who are offered equity, preferred shares and longer-dated bonds that would be secured by the recently transferred IP assets. The company said the bond exchange offer is not contingent upon lenders approving the adjoining amendment.

The company said in an 8-K filing earlier in the week that the amendment would facilitate related transactions, including directing the term loan’s agent to dismiss, with prejudice, litigation around transferred IP assets, as well as transfer the remaining 27.96% U.S. IP stake that was not included in the original transfer. Wilmington Trust is administrative agent on the TLB.

The company offered to make a $150 million paydown at par to consenting lenders, as well as a slight increase in pricing, to L+322, and 1.5% annual amortization, according to a source.

The company said on its earnings call late Monday it entered into agreements with two of its largest creditors—identified in an SEC filing as GSO Capital Partners and Anchorage—that it said collectively held about 67% of the PIK toggle notes and about 28% of the term loan.

The two firms were obligated to consent to the amendment, which requires majority approval. The company said if the amendment passed and the exchange offer net requisite participation, they would purchase $97 million of new incremental 13% secured notes.

Proceeds from the notes, as well as $30 million of additional term debt, would fund the repurchase of the $150 million of term debt, SEC filings show. The $30 million of term debt would be provided by new or existing lenders, or the company’s sponsors, and would be issued at a 2% discount.

The amendment request also facilitates the issuance of the new term debt and notes, SEC filings show.

As for the bond exchange, which requires 95% participation from bondholders, holders of the $566.5 million 7.75%/8.5% PIK toggle notes are offered to exchange their notes for the following:

• up to $250 million of 13% senior secured “IPCo” notes due 2021
• up to $190 million of new 7% preferred stock issued by the parent
• up to 15% of the parent company’s common stock

Holders who tender their notes prior to the early tender deadline of 5 p.m. ET on June 23 are offered consideration, per $1,000 of principal amount, as follows:

• $441.308013 principal amount of the IPCo notes
• 0.335394 shares of New Series A Preferred Stock
• 30.695204 shares of Class A Common Stock

On Dec. 5, J. Crew International transferred a 72.04% interest in certain domestic IP assets to an unrestricted subsidiary for “the purpose of providing us flexibility in connection with evaluating opportunities to enhance our capital structure,” the company has said in SEC filings. — Kerry Kantin

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