True Religion reaches milestone agreement with lenders

True Religion Brand Jeans has secured critical stakeholder support for a comprehensive financial recapitalization of the company’s capital structure. In signing a Restructuring Support Agreement (“RSA”) with the substantial majority of its Term Loan Lenders and its Sponsor, TowerBrook Capital Partners, the company will reduce its debt by over US $350 million and convert it into the substantial majority of the reorganized Company’s equity.
To implement the terms of the pre-arranged restructuring expeditiously, the company filed a voluntary Chapter 11 petition in the United States Bankruptcy Court for the District of Delaware, and expects it will take 90 to 120 days to obtain confirmation of its pre-arranged plan by the Bankruptcy Court. Throughout the implementation of this process, True Religion will continue to operate its business without interruption to customers, employees and business partners.
“After a careful review, we are taking an important step to reduce our debt, reinvigorate True Religion’s iconic brand and position the company for future growth and success,” said President and CEO of True Religion, John Ermatinger. “By dramatically improving our capital structure 24 months in advance of our term loan maturity, we will continue business operations as usual and provide our employees and business partners the long-term stability they need, while providing the necessary flexibility to invest in growing our digital footprint, building connections with customers, and improving organizational competencies. I want to recognize our lender community, our private equity owner, TowerBrook Capital Partners, and our financial and legal advisors for negotiating a constructive outcome for the company. Importantly, I want to thank our dedicated employees for remaining focused on the business, and our loyal customers and valued business partners for their support throughout this process.”
Ermatinger continued, “I am also proud to announce that year to date adjusted EBITDA through May at US $7.1 million is up 95 per cent versus last year. This improved performance will allow us to enter into the next phase of our recapitalization process with confidence as we continue to execute against our strategic plan and drive the business forward.”
True Religion has secured post-petition debtor-in-possession (DIP) financing from Citizens Bank N.A. for up to US $60m. Once True Religion’s plan is confirmed and it achieves the desired deleveraging of its balance sheet under the Plan, True Religion will have sufficient exit funding, also provided by Citizens Bank N.A., in addition to its ongoing cash flow, to finance operations post confirmation.
The plan provides for full payment of claims of True Religion’s continuing trade creditors, which includes continuing vendors, suppliers and landlords. True Religion has taken additional steps in order to ensure a smooth and orderly transition through the Chapter 11 filing. The company has filed a motion to honor and pay prepetition purchase orders that were issued prior to the petition date, but which have not yet come due. True Religion has also filed a separate motion to pay certain vendor claims that arose prior to the Petition Date, as well as to pay for goods received within 20 days of the bankruptcy filing.
The company’s legal advisors include Wachtell Lipton Rosen & Katz and Pachulski Stang Ziehl & Jones. The company’s financial advisor is MAEVA Group, LLC.