The seller note can be repaid by LGP at any time prior to the end of its three year term, bears cash interest of $8 million per year, and provides for additional interest of $417 thousand per month, resulting in a $100 million maximum payment obligation at maturity.
Further, the note will be secured by a first priority lien on the Lucky Brand trademark and also by a second priority lien on the other assets of Lucky Brand that are expected to be pledged to third party lenders.
Under LGP's ownership, Lucky Brand Jeans will also assume the proportionate share of FNP's sourcing contract with Li & Fung in addition to other FNP obligations.
This $225 million purchase price reflects a multiple of over 7 times the brand's latest twelve months pro forma adjusted standalone EBITDA (inclusive of corporate costs estimated to run the business on a standalone basis). Consummation of this transaction is subject to customary closing conditions and is expected to occur in the first quarter of 2014.
William L. McComb, Chief Executive Officer of Fifth & Pacific Companies, Inc., said: "It is truly an historic day at Fifth & Pacific Companies - a return to our roots as a mono-brand company. Just as I indicated back on October 7th when we announced the Juicy Couture deal with Authentic Brands Group, the decision to sell Lucky Brand Jeans is the result of a process we began last year - studying our resource allocation needs, our capital structure, and the operating risks and opportunities associated with a multi-brand portfolio.
“Simply put, it is the outcome of our work to identify the best way to unlock shareholder value. Taken together, the deals we have announced recently related to our divestitures of Juicy Couture and Lucky Brand Jeans result in estimated net proceeds of $370 million to $380 million, which includes the face value of the seller note in today's transaction.
“The aggregate net proceeds for the two transactions reflect estimated cash restructuring and other transition costs and charges associated with the assignment or termination of leases, severance and other associated operating company transition activities, including estimated costs and charges previously disclosed at the time that the Juicy Couture deal closed."
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