Differential Brands Group plans $1.51 billion credit facilities

By Sara Rosenberg

New York, July 5 – Differential Brands Group Inc. has received a commitment for $1,509,000,000 of credit facilities to help fund its acquisition of Global Brands Group Holding Ltd.’s North American licensing business, according to an 8-K recently filed with the Securities and Exchange Commission.

The facilities consist of a $150 million 4.5-year asset-based revolver, a $685 million five-year first-lien term loan and a $674 million six-year second-lien term loan.

As committed, pricing on the revolver is expected at Libor plus 600 basis points with a 0% Libor floor, pricing on the first-lien term loan is expected at Libor plus 600 bps with a 1.5% Libor floor, and pricing on the second-lien term loan is expected at Libor plus 700 bps with a 1.5% Libor floor plus 275 bps PIK from the closing of the transaction and Libor plus 800 bps with a 1.5% Libor floor plus 125 bps PIK onwards.

The revolver and first-lien term loan have two 25 bps step-downs upon achieving and maintaining a first-lien leverage ratio equal to or less than 2.75 times and 2.25 times, respectively.

The first- and second-lien term loans have call protection of 103 in year one, 102 in year two and 101 in year three.

Prior to closing, the first-lien commitment parties have the right to reduce the revolver by $50 million to $100 million and upsize the first-lien term loan by $50 million to $735 million.

Ares Capital Management LLC and HPS Investment Partners LLC are the joint lead arrangers and bookrunners on the revolver and first-lien term loan. GSO Capital Partners LP provided the second-lien loan commitment.

In consideration of its provision of the second-lien loan, funds managed by GSO will also receive shares of common stock of the company in a total amount equal to 25% of the common stock outstanding on the date of the transaction on a fully diluted basis.

Closing on the $1.38 billion acquisition is expected in the third quarter, subject to customary conditions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and stockholder approval.

Differential Brands is a Commerce, Calif.-based platform that focuses on branded operating companies in the premium apparel, footwear and accessories sectors.

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