G-III Apparel makes investor-friendly changes to $350 million term loan, ups spread to 525 bps

By Paul A. Harris

Portland, Ore., Oct. 4 – G-III Apparel Group Ltd. hiked spread talk and price talk amid other investor-friendly changes to its $350 million six-year term loan B (B1/BB+), according to a market source.

Spread talk increased to Libor plus 525 basis points from earlier talk of 450 bps to 475 bps.

Price talk deepened the original issue discount to 98 from 99.

The 101 soft call protection was increased to one year from six months.

The incremental allowance decreased to $125 million plus an unlimited amount up to 2.25 times first-lien net leverage. Previously the allowance had been set at $175 million plus an unlimited amount up to 3.25 times first-lien net leverage.

The allowance is subject to 50-bps MFN for the life of the loan, increased from 12 months.

Mandatory prepayments on the term loan are from 100% of debt issuances, excluding permitted debt, 100% of net asset sales proceeds and net insurance proceeds in excess of an annual amount to be agreed, subject to a reinvestment period, and a 75% excess cash flow sweep at 3 times leverage, stepping down to 50% at 2.75 times and 25% at 2.25 times.

The company’s $1 billion senior secured credit facility also includes a $650 million five-year ABL revolver.

Barclays and J.P. Morgan Securities LLC are the joint lead arrangers on the term loan, and Barclays, JPMorgan and Bank of America Merrill Lynch are the joint lead arrangers on the revolver.

Proceeds will be used to help fund the acquisition of Donna Karan International Inc. and replace an existing $450 million ABL revolver.

Under the agreement, Donna Karan is being bought from LVMH Moet Hennessy Louis Vuitton for $650 million, subject to customary adjustments at closing.

Other funds for the transaction will come from $75 million of newly issued G-III common stock to LVMH and a $75 million 6.5-year seller note.

Closing is expected late this year or early next year, subject to certain conditions.

G-III Apparel is a New York-based designer, manufacturer and marketer of branded apparel and accessories.

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