David’s Bridal is skipping a coupon payment due today, Monday, Oct. 15, on its $270 million in 7.75% unsecured bonds due 2020 as the company and various groups of its creditors work toward a consensual agreement on terms for a recapitalization that would stave off a bankruptcy filing, according to sources. The parties plan on using the grace period following the skipped payment to work toward reaching an agreement on recapitalization terms, sources add.
At an all-hands meeting earlier this month held by the company at the offices of Debevoise & Plimpton,
the company’s legal counsel, and attended by advisors to various creditor groups, the parties discussed a recent proposal from the company that contemplated a minority noteholder constituency led by Solace funding an approximately $80 million new-money equity investment and majority noteholder Oaktree subordinating approximately $80 million of its own term loan holdings, according to sources. The company’s proposal contemplated proceeds from the $80 million new-money investment going toward a paydown on Bridal’s $492.1 million term loan due October 2019, with the term lenders rolling into a new secured credit agreement, the sources add. That proposed deal, which contemplated a conversion of the notes into equity, would get the company’s total leverage to approximately 4x, which is what a group of term loan lenders is seeking, according to sources.
The company’s proposal sought to bridge the gap between proposals made by the noteholders on the one hand and the lender group on the other, according to sources. Transactions discussed by the parties have contemplated noteholders waiving the Oct. 15 coupon payment in order to facilitate the recapitalization, the sources add.
Since the all-hands meeting, the creditor groups have continued discussions as they seek to narrow the bid/ask on certain open items including, among other things, the rate on the proposed new secured debt and certain intercreditor terms, sources say. Sources noted that talks remain in process and that it is not certain that a definitive agreement will be reached among the parties.
The term loan lender group is advised by Greenhill and Jones Day, a
majority noteholder constituency led by Oaktree funds is advised by Moelis & Company and Paul Weiss, and a minority noteholder constituency led by Solace funds is advised by
Fried Frank. The company is
advised by Evercore and Debevoise & Plimpton. In addition to the advisors completing due diligence under non-disclosure agreements, Solace, Oaktree and certain members of the term lender group have become restricted as part of negotiations, according to sources.
The notes last traded in round lots on May 15 at 48.5, according to TRACE and the term loan was quoted this morning at 89.5/90.5, according to a trading desk.
The lender group had previously stated to the company that it would only consent to a prepetition refinancing that paid down their holdings at par and would otherwise seek to take ownership in a bankruptcy proceeding, but the company was unable to secure financing that would be able to pay down the lenders in full, and given current softness in the business, a new secured intercreditor agreement with an increased interest rate and other modified features has become preferable, sources say. In addition to a majority of unsecured note holdings, Oaktree owns a blocking position in the term loan, and the lenders are seeking to work constructively with the noteholders to reach a deal, sources add.
David’s Bridal and Solace did not respond to requests for comment for this story. The company’s private-equity sponsor Clayton Dubilier & Rice and Oaktree declined to provide comment for this story.