NexCen Invests in Blass, Gets Credit Breather
By Staff -- Home Textiles Today, 7/28/2008 12:00:00 AM
New York —
Brand licensing and franchise firm NexCen Brands has committed more than $1 million on the money-losing Bill Blass Couture business — writing off a $950,000 loan and now taking on $425,000 in debt — and says it could invest up to $1.9 million by the end of the year.
Meanwhile, the company received a three-week extension, through Aug. 8, to resolve disagreements with its main lender, BTMU Capital.
Of the Blass investment, Rick Platt, president of NexCen Home Studios, told HTT, "Most fashion houses fund the couture business as an umbrella for the brand." Bringing all components of the brand in-house will give NexCen an opportunity to improve the couture arm's financials and should make Bill Blass a more attractive acquisition, he added.
"The Bill Blass couture business currently operates at a loss and the company estimates it could need to make a net investment between $1.7 and $1.9 million prior to the end of the fiscal year," NexCen stated in a filing with the SEC.
The high-fashion Blass couture business was not part of the Bill Blass brand assets originally purchased by NexCen in February 2007. Operating as a separate business known as Bill Blass Ltd. LLC, the couture firm was owned by Michael Groveman and Carly Andrews, Inc. That entity purchased the couture line just prior to the NexCen acquisition of Blass, and have since been running the high fashion line as a royalty-free licensee of NexCen.
NexCen stated in the SEC filing, "In the first quarter of 2008, the company loaned approximately $950,000 to Bill Blass Couture to support marketing expenses. Following the closing [of the purchase deal], the company expects to eliminate Bill Blass Couture's obligations to repay this amount."
The purchase agreement will also permit Groveman to withdraw $25,000 from his company's cash reserves prior to the closing, in exchange for "transitional consulting services" for a period of up to 45 days. "The purchase price paid at closing," the SEC filing said, "was comprised of nominal consideration and the company's assumption of approximately $425,000 in net liabilities, excluding amounts owed by Bill Blass Couture to the company."
On the banking front, NexCen and BTMU remained at odds over whether NexCen is in default on various covenants; in the meantime the two seek to forge a restructured financial relationship, according to a form 8-K filed by NexCen.
"We are gratified by the ongoing support of our lender as we work together to develop a long-term financing solution for NexCen," said NexCen ceo Robert D'Loren.
In reaching the extension, NexCen won a series of amendments to the existing credit facility that enable it to fund various business expenses — such as $4.6 million for accounts payable and working capital, and $1.1 million in management fees due its subsidiaries — as it continues to operate.
BTMU also won amendments that will see it paid about $2.6 million for interest on outstanding notes and some $418,000 for advisory services.
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