Joe’s Jeans gets default notices on term loan, revolver; talks ongoing

By Caroline Salls

Pittsburgh, July 29 – Joe’s Jeans Inc. received an additional notice of default and reservation of rights letter from term agent Garrison Loan Agency Services LLC and an additional reservation of rights letter under from administrative and collateral agent CIT Group Commercial Services, Inc., according to an 8-K filed Wednesday with the Securities and Exchange Commission.

Joe’s Jeans said the Garrison letter notified it that a forbearance default occurred as a result of the company’s failure to comply with sale/recapitalization process milestones.

The company said the sales/recapitalization process refers to the sale of substantially all of its assets or the obtaining of financing sufficient to satisfy all obligations under the respective credit agreements.

As a result of the default, the forbearance period for Joe’s term loan credit agreement has been terminated, provided, however, that the termination has no impact on amendments to the term loan contained in the forbearance agreement.

As of May 31, there was $59.12 million outstanding under the term loan agreement. The company said it has been paying interest at the default rate retroactive to Oct. 1, 2014.

Meanwhile, Joe’s said the CIT letter notified it that a default occurred under the CIT forbearance agreement as a result of the company’s failure to comply with the sale/recapitalization process milestones.

As a result of the default, the forbearance period for the company’s CIT revolving credit agreement has been terminated, provided, however, that the termination has no impact on amendments to the revolver agreement.

As of May 31, there was $20.82 million outstanding and $11.5 million of availability under the revolver. The company has been paying interest at the default rate under the revolver agreement retroactive to Oct. 1, 2014.

According to the 8-K, Joe’s is in discussions with Garrison and CIT regarding a resolution to the defaults, including amendments to the existing agreements and waivers of the defaults and events of defaults or a refinancing of the debt.

The company said the exercise of some default-related remedies may have a material adverse effect on its liquidity, financial condition and results of operations and could cause it to become bankrupt or insolvent.

As previously reported, Joe’s hired Carl Marks Advisory Group to help its board of directors explore strategic and financing alternatives to resolve the outstanding events of default with its lenders.

Joe’s Jeans is a Commerce, Calif.-based apparel company.

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