Frederick's to replace $22.6 million debt, preferreds with new shares

By Marisa Wong

Milwaukee, Feb. 2 - Frederick's of Hollywood Group Inc. announced that it has entered into an agreement with Fursa Alternative Strategies LLC to exchange, at a 50% discount, approximately $22.6 million of outstanding debt and preferred stock for approximately $11.3 million in common stock. Fursa is the holder of the company's outstanding tranche C debt and series A preferred stock and one of the company's largest common shareholders.

Fursa has agreed to exchange the tranche C debt, with an aggregate principal amount and accrued interest of $14 million, and to convert $8.6 million of series A preferreds and accrued dividends into a total of $11.3 million in common stock.

The conversion price will be calculated based on the volume-weighted average price of the company's common stock for 10 trading days, including the five days prior to and the five days including and after the announcement.

Upon the closing of the transaction, Frederick's will also issue Fursa three-, five- and seven-year warrants. Each warrant will be used to purchase 500,000 shares of common stock at exercise prices of 150%, 175% and 200% of the conversion price, respectively, but not less than the stock price on the closing date.

The transaction is subject to shareholder approval and other customary closing conditions. Frederick's will hold an annual shareholders meeting in the third fiscal quarter ending April 24, at which shareholders will be asked to approve the transaction.

Frederick's is a New York-based retailer of women's intimate apparel and related products.

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