Claire’s holders tender $333 million notes into exchange offer so far

By Angela McDaniels

Tacoma, Wash., Aug. 29 – Claire's Stores, Inc. had received tenders for $228.9 million principal amount of its 8 7/8% senior secured second-lien notes due 2019, $103.3 million of its 7¾% senior notes due 2020 and $800,000 of its 10½% senior subordinated notes due 2017 as of 5 p.m. ET on Sept. 1, according to a company news release.

As previously reported, the company is offering to exchange any and all of its outstanding $450 million of 8 7/8% notes, $320 million of 7¾% notes and $26.5 million of 10½% notes not held by Claire’s Inc. for up to $40 million of new senior secured term loans of Claire's Stores, up to $130 million of new senior secured term loans of CLSIP LLC, a newly formed unrestricted subsidiary of Claire's Stores, and up to $60 million of new senior term loans of Claire's (Gibraltar) Holdings Ltd., the holding company of Claire's Stores' European operations.

The early tender time was 5 p.m. ET on Sept. 1, and the private exchange offer will expire one minute after 11:59 p.m. ET on Sept. 12.

To the extent the exchange offer is not fully subscribed, funds managed by affiliates of Apollo Global Management, LLC and Claire's Inc., the parent of Claire's Stores, have agreed to effect a similar exchange of up to $183.6 million principal amount of 10½% notes held by the Apollo Funds and up to $58.7 million principal amount of 10½% notes held by Claire's Inc. This exchange will count toward satisfaction of the exchange offer's $400 million minimum tender condition, thus ensuring the condition is satisfied.

Amendments

On Aug. 29, the following amendments were made to the exchange offer:

• The early tender time was extended from 5 p.m. ET on Aug. 26;

• The expiration time was extended from one minute after 11:59 p.m. ET on Sept. 9;

• To the extent the exchange offer is not fully subscribed, tendering holders of 8 7/8% notes and 7¾% notes will receive up to $83.64 and $21.36, respectively, of additional term loans per $1,000 principal amount of notes tendered;

• To the extent funds managed by affiliates of Apollo and Claire's Inc. participate in the transaction through the affiliated holder exchange and receive term loans, all such term loans held by them and their affiliates will have pay-in-kind interest; and

• Claire’s Inc. will contribute about $11.5 million of cash to the capital of Claire's Stores once the exchange offer is completed, subject to the receipt of the consent of the lenders under Claire's Stores’ U.S. credit facility to include such cash contribution in the calculation of Claire's Stores' EBITDA for the purposes of compliance with the financial ratio requirements. If this consent is not obtained within 45 days after the completion of the exchange offer, Claire’s Inc. will pledge that $11.5 million of cash as collateral securing the CLSIP term loans. If such consent is obtained thereafter, Claire’s Inc. may withdraw the cash for the sole purpose of making the cash contribution.

Exchange amounts

For each $1,000 principal amount of notes exchanged by the early deadline, the company is offering the following:

• For the 8 7/8% notes, $55.02 of Claire’s Stores term loans, $178.81 of CLSIP term loans and $82.53 of Claire’s Gibraltar term loans, for $316.36 of total term loans;

• For the 7¾% notes, $39.76 of Claire’s Stores term loans, $129.24 of CLSIP term loans and $59.64 of Claire’s Gibraltar term loans, for $228.64 of total term loans; and

• For the 10½% notes, $95.01 of Claire’s Stores term loans, $308.65 of CLSIP term loans and $142.52 of Claire’s Gibraltar term loans, for $546.18 of total term loans.

Each of the above payments includes an early tender premium of $30.00 of Claire's Gibraltar term loans.

Accrued interest on notes exchanged in the offer from the applicable last interest payment date up to but excluding the settlement date will be canceled. Interest on the term loans will accrue from the settlement date.

The amendments to the exchange offer provide that, to the extent that the exchange offer is not fully subscribed for the total consideration at the expiration time and as a result a portion of the $230 million principal amount of term loans remains unallocated, tendering holders of 8 7/8% notes and 7¾% notes will receive additional term loans of up to the following principal amounts:

• $14.55 of Claire’s Stores term loans, $47.27 of CLSIP term loans and $21.82 of Claire’s Gibraltar term loans for the 8 7/8% notes; and

• $3.72 of Claire’s Stores term loans, $12.07 of CLSIP term loans and $5.57 of Claire’s Gibraltar term loans for the 7¾% notes.

To the extent the amount of unsubscribed term loans is less than the aggregate principal amount of term loans required to allocate the maximum potential additional consideration to the tendering holders of 8 7/8% notes and 7¾% notes, then such tendering holders will receive a pro rata portion of the unsubscribed term loans, but no more than the maximum potential additional consideration.

Term loan terms

Each of the term loans will bear interest at 9% a year and mature in 2021.

Bank of New York Mellon Trust Co., NA will be the administrative agent.

The Claire's Stores term loan will be guaranteed by all of Claire's Stores domestic subsidiaries and secured on a first-priority basis by substantially all the assets of Claire's Stores and the guarantor subsidiaries.

The CLSIP term loan will be secured by substantially all the assets of CLSIP, consisting only of certain intellectual property assets to be contributed to CLSIP by a subsidiary of Claire's Stores and an agreement between CLSIP and such subsidiary that provides that Claire's Stores may continue to have exclusive use of such intellectual property in return for annual payments of $12 million. It will be guaranteed by CLSIP's parent, CLSIP Holdings LLC, which will secure the guarantee with a pledge to the equity of CLSIP. It will not be guaranteed by Claire's Stores or any of its other subsidiaries.

The Claire's Gibraltar term loan will be unsecured and not guaranteed by Claire's Stores or any of its other subsidiaries.

Refinancing

In connection with the exchange offer, Claire's Stores will complete a refinancing transaction with the lenders under its existing $115 million revolving credit facility. Under this refinancing

• Claire's Gibraltar will be party to a new $40 million credit agreement maturing Feb. 4, 2019 with the lenders of the U.S. credit facility, the proceeds of which will be used to reduce outstanding amounts under the U.S. credit facility by $40 million;

• Claire's Stores, its domestic subsidiaries and Claire's Inc. will be parties to a new ABL credit agreement maturing Feb. 4, 2019, providing for revolving credit loans that will have a primary lien on ABL collateral, and availability subject to a borrowing base of up to $75 million less any amounts outstanding under the U.S. credit facility, the proceeds of which will be used to reduce outstanding amounts under the U.S. credit facility;

• The availability of the U.S. credit facility will be reduced to an amount equal to $75 million less any amounts outstanding under the ABL credit facility from time-to-time; and

• The maturity of the U.S. credit facility will be extended until Feb. 4, 2019.

Claire's Gibraltar and certain subsidiaries are party to a $50 million unsecured multi-currency revolving credit facility that matures Aug. 20, 2017. Consent of the lender under that credit facility is required for the consummation of the exchange offer and is also required to allow Claire's Gibraltar to distribute cash to Claire's Stores in an amount required to enable Claire's Stores to fund its near-term debt service and other obligations. The lender has not provided those consents.

The exchange offer is conditioned on the lender agreeing to an amendment satisfactory to Claire's Gibraltar providing the foregoing consents or the refinancing of the Europe credit facility with new debt arrangements satisfactory to Claire's Gibraltar that allow the exchange offer and distributions of cash from Claire's Gibraltar in amounts sufficient for Claire's Stores.

D.F. King & Co., Inc. (800 967-7574 or 212 269-5550) is the information and exchange agent.

Claire’s is a Pembroke Pines, Fla.-based retailer of fashion accessories and jewelry.

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