Aeropostale enters $150 million of five-, 10-year term loans

By Marisa Wong

Madison, Wis., May 28 - Aeropostale, Inc. entered into a loan and security agreement with affiliates of Sycamore Partners on Friday for term loans totaling $150 million, according to an 8-K filing with the Securities and Exchange Commission.

Simultaneously with entering into the loan agreement, the company amended its existing revolving credit facility with Bank of America, NA to allow for the incurrence of the additional debt under the new term loans.

The new loans consist of two tranches: a five-year $100 million term loan A facility and a 10-year $50 million term loan B facility.

The tranche A loan bears interest at 10%, with up to 50% of the interest payable in kind during the first three years and up to 20% payable in kind during the final two years. The first year of interest, in the amount of $10 million, was prepaid in cash in full at closing, and no other interest payments are required to be paid during the first year.

The tranche A loan has no amortization requirements and is scheduled to mature on May 23, 2019.

Prepayment of the tranche A loan prior to the second anniversary of the closing date is subject to a prepayment premium.

The tranche B loan will not accrue any interest and will be paid off in equal installments of 10% per year.

The tranche B loan may be prepaid at any time without premium or penalty.

As a condition to funding the tranche B loan, the company also entered into a non-exclusive sourcing agreement with an affiliate of Sycamore Partners.

The maturity of the tranche B loan will be the earlier of 10 years and the expiration or termination of that sourcing agreement.

The loan agreement contains representations, covenants and events of default that are consistent with the company's existing revolver. The agreement also contains a $70 million minimum liquidity covenant.

Loan proceeds will be used for working capital and other general corporate purposes.

The clothing retailer is based in New York.

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