RLPC: Sycamore levers up brands, eyes future sales

NEW YORK Fri Feb 14, 2014 9:43am EST

NEW YORK Feb 14 (Reuters) - Private equity firm Sycamore Partners, in conjunction with its takeover of The Jones Group Inc, is preparing for the potential sale of some of the apparel company's brands by splitting up divisions and raising debt at those segments, sources told Thomson Reuters LPC.

Sycamore and The Jones Group declined to comment.

Upon finalizing the Jones acquisition, Sycamore is looking to focus on the lower price point and better performing brands.

The private equity firm said it plans to transfer ownership of assets including the Jones Apparel, Kurt Geiger and Stuart Weitzman brands to separate controlled affiliates of Sycamore via carve-out transactions, according to an 8-K filing.

Sycamore, meanwhile, will retain global footwear company Nine West Co and affordable denim producer Jeanswear Co.

Sycamore will maintain ownership of the carve-outs initially.

Other retailers including Liz Claiborne Inc have created shareholder value by shedding brands at opportune times, said a sellside analyst. The retailer changed its name to Fifth & Pacific Cos in 2012, months after selling its Liz Claiborne and Monet brands to JC Penney Co, and focused on its higher revenue brands that at the time included Juicy Couture, Lucky Brand and Kate Spade.

The Jones Group owns over 35 clothing and accessories brands. Among them, the Jones New York brand has exhibited poor product performance while Nine West and Jeanswear have boosted performance.

Sycamore is raising $470 million in debt at Nine West Holdings Inc, which will include Nine West Co and Jeanswear Co, and will represent the surviving corporation after the buyout and carve-outs are completed. Sycamore will offer that amount to investors on Friday in a term loan B backing the combination. Morgan Stanley, Jefferies and MCS Capital Markets LLC are leading the deal.

Sycamore has also committed financing for a $455 million bridge loan that the company may use to buy back existing notes.

On February 19, Sycamore will launch $255 million in debt financing to fund its acquisition of Stuart Weitzman, and subsequent carve-out of the high-end footwear brand, said sources. Jefferies and MCS Capital Markets lead the transaction.

It is unclear whether syndication of other spinoff-related financings will follow.

According to a proxy statement, Wells Fargo and Bank of America Merrill Lynch committed to provide a $175 million senior secured asset-based revolving credit facility, and Wells Fargo committed to provide a $25 million senior secured term loan at the Jones Apparel carve-out level.

The buyout financing also includes a 70 million pound sterling senior secured unitranche facility committed by KKR Asset Management at the Kurt Geiger carve-out level.

A 25 million pound sterling asset-based revolver provided by Burdale Financial will be used for working capital, capital expenditures and other general corporate purposes of the Kurt Geiger business after the closing of the merger.

Backing The Jones Group buyout, Sycamore has provided an equity commitment of $551 million. KKR Asset Management has committed $60 million in equity.

Jones put itself up for sale in the summer, following pressure from activist investor Barington Capital Group LP to focus on its shoe brands and to cut down its non-core fashion brands, according to Reuters.

The Jones Group's brands and licensing agreements include Nine West, Brian Atwood, Anne Klein, Robert Rodriguez, Stuart Weitzman and Easy Spirit.

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