Claire's offers to swap notes due 2017, 2019, 2020 for new term loans

By Wendy Van Sickle

Columbus, Ohio, Aug. 12 – Claire's Stores, Inc. has begun an offer to exchange any and all of its outstanding $450 million of 8 7/8% senior secured second lien notes due 2019, its $320 million of 7¾% senior notes due 2020 and its $26.5 million of 10½% senior subordinated notes due 2017 not held by Claire’s Inc.

The company is offering in exchange for the notes up to $40 million of new senior secured term loans of Claire's Stores, Inc., up to $130 million of new senior secured term loans of CLSIP LLC, a newly formed unrestricted subsidiary of Claire's Stores and up to $60 million of new senior term loans of Claire's (Gibraltar) Holdings Ltd., the holding company of Claire's Stores' European operations, according to a press release.

All of the term loans will mature in 2021.

The term loans will be made pursuant to agreements to be entered into by Claire’s Stores, CLSIP and Claire's Gibraltar, respectively, and the Bank of New York Mellon Trust Co., NA, as administrative agent.

Each of the term loans will bear interest at 9% a year.

The Claire's Stores term loan will be guaranteed by all of Claire's Stores domestic subsidiaries and secured on a first priority basis by substantially all the assets of Claire's Stores and the guarantor subsidiaries.

The CLSIP term loan will be secured by substantially all the assets of CLSIP, consisting only of certain intellectual property assets to be contributed to CLSIP by a subsidiary of Claire's Stores and an agreement between CLSIP and such subsidiary that provides that Claire's Stores may continue to have exclusive use of such intellectual property in return for annual payments of $12 million. It will be guaranteed by CLSIP's parent, CLSIP Holdings LLC, which will secure the guarantee with a pledge to the equity of CLSIP. It will not be guaranteed by Claire's Stores or any of its other subsidiaries.

The Claire's Gibraltar term loan will be unsecured and not guaranteed by Claire's Stores or any of its other subsidiaries.

For each $1,000 principal amount of notes exchanged by the early deadline, 5 p.m. ET on Aug. 25, the company is offering the following:

• For the notes due 2019, $55.02 of Claire’s Store term loans, $178.81 of CLSIP term loans and $82.53 of Claire’s Gibraltar term loans, for $316.36 in total term loans;

• For the notes due 2020, $39.76 of Claire’s Store term loans, $129.24 of CLSIP term loans and $59.64 of Claire’s Gibraltar term loans, for $228.64 in total term loans; and

• For the notes due 2017, $95.01 of Claire’s Store term loans, $308.65 of CLSIP term loans and $142.52 of Claire’s Gibraltar term loans, for $546.18 in total term loans.

The exchange offer will expire one minute after 11:59 ET on Sept. 9. Those submitting their notes for exchange will receive the total consideration, minus an early tender premium of $30 in Claire's Gibraltar term loans.

Accrued interest on notes exchanged in the offer from the applicable last interest payment date to, but not including, the settlement date will be canceled. Interest on the term loans will accrue from the settlement date.

In connection with the exchange offer, Claire's Stores will complete a refinancing transaction with the lenders under its existing $115 million revolving credit facility. Under this refinancing:

• Claire's Gibraltar will be party to a new $40 million credit agreement maturing Feb. 4, 2019 with the lenders of the U.S. credit facility, the proceeds of which will be used to reduce outstanding amounts under the U.S. credit facility by $40 million;

• Claire's Stores, its domestic subsidiaries and Claire's Inc., its corporate parent, will be parties to a new ABL credit agreement maturing Feb. 4, 2019, providing for revolving credit loans that will have a primary lien on ABL collateral, and availability subject to a borrowing base, of up to $75 million less any amounts outstanding under the U.S. credit facility, the proceeds of which will be used to reduce outstanding amounts under the U.S. credit facility;

• The availability of the U.S. credit facility will be reduced to an amount equal to $75 million less any amounts outstanding under the ABL credit facility from time-to-time; and

• The maturity of the U.S. credit facility will be extended until Feb. 4, 2019.

Claire's Gibraltar and certain subsidiaries are party to a $50 million unsecured multi-currency revolving credit facility that matures Aug. 20, 2017. Consent of the lender under that credit facility is required for the consummation of the exchange offer and is also required to allow Claire's Gibraltar to distribute cash to Claire's Stores in an amount required to enable Claire's Stores to fund its near term debt service and other obligations. The lender has declined to provide those consents.

The exchange offer is conditioned on the lender agreeing to an amendment satisfactory to Claire's Gibraltar providing the foregoing consents, or the refinancing of the Europe credit facility with new debt arrangements satisfactory to Claire's Gibraltar that allow the exchange offer and distributions of cash from Claire's Gibraltar in amounts sufficient for Claire's Stores.

Claire's Inc., the parent of Claire's Stores, owns about $58.7 million of the subordinated notes. Certain funds managed by affiliates of Apollo Global Management, LLC, which are indirect controlling stockholders of the company own approximately $183.6 million of Claire's Stores' 10½% PIK senior subordinated notes due 2017. None of these affiliated holders will participate in the exchange offer.

However, if the exchange offer is not fully subscribed for the total consideration, the affiliated holders have agreed to effect a similar exchange of their respective notes, on the same economic terms offered for early-tendered notes in the exchange offer concurrently with the completion or termination of the exchange offer.

The exchange offer is conditioned on a minimum of $400 million combined principal amount of notes and, if applicable, PIK subordinated notes being validly tendered and not withdrawn. The exchange offer is also conditioned upon the completion of the bank refinancing, and some other conditions.

Tenders may be withdrawn through 5 p.m. ET on Aug. 25.

D.F. King & Co., Inc. (800-967-7574 or 212-269-5550) is the information and exchange agent.

Claire’s is a Pembroke Pines, Fla.-based retailer of fashion accessories and jewelry.

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