Children’s Place gets $78.6 million term loans via shareholder

By Marisa Wong

Los Angeles, Feb. 29 – Children’s Place, Inc. announced a new financing agreement with majority shareholder Mithaq Capital SPC for $78.6 million of interest-free, unsecured and subordinated term loans to strengthen its liquidity position, according to a press release.

The company also announced the appointment of four people to its board of directors. Mithaq appointed Turki Saleh A. AlRajhi, Muhammad Asif Seemab, Muhammad Umair and Hussan Arshad. In conjunction with these appointments, current directors Elizabeth Boland, Alicia Enciso, Katherine Kountze and Wesley McDonald have resigned from Children’s Place’s 10-member board. AlRajhi has been appointed chairman-elect and is sharing the chairman’s duties with Norman Matthews during a transition period.

Under the financing agreement, Mithaq provided an initial tranche of $30 million on Feb. 29 in the form of an interest-free, unsecured and subordinated term loan. Mithaq will also provide an additional $48.6 million interest-free, unsecured and subordinated term loan on or before March 29, subject to some conditions.

Upon funding of the second term loan, at least four of the remaining non-Mithaq appointed directors will resign, and directors appointed by Mithaq will comprise a majority of the board.

The company has secured certain minority shareholder protections. In addition, the governance agreements require supermajority board of directors authorization for certain actions to be taken by the company during the initial transition period.

The company said it expects to be in a position to close its previously announced $130 million term loan in March, as contemplated by the non-binding term sheet that the company entered into with 1903P Loan Agent, LLC, and is continuing to pursue alternative financing on terms no less favorable in the aggregate to the company.

As the company continues to work to improve its liquidity position and strengthen its balance sheet, some of its vendors and service providers material to the business have informed the company that they have halted or plan to halt service to the company as a result of delayed payments, according to the press release.

The company is in ongoing talks with its vendors and service providers regarding paths forward to ensure continued service and plans to use a portion of the proceeds from the new financings to support operations, including payments to vendors and service providers to address overdue accounts payable.

As previously disclosed, Mithaq’s acquisition of Children’s Place’s common stock triggered a change of control, thereby causing a default under the company’s amended and restated credit agreement with its bank lenders.

As a result of this default, the company is currently subject to cash dominion.

The company and its bank lenders have agreed to a forbearance agreement that, among other things, permits the company’s entry into the Mithaq term loans and under which the bank lenders have agreed to forbear from exercising rights and remedies under the credit agreement with respect to the above-mentioned default during a limited forbearance period.

The forbearance agreement contemplates a permanent waiver of the change of control default upon the satisfaction of certain conditions, including the company’s receipt of proceeds from the financings described above.

The financings are subject to customary closing conditions.

The specialty retailer is based in Secaucus, N.J.

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