Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
8-K
CURRENT
REPORT PURSUANT
TO
SECTION 13 OR 15(D) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of
report (Date of earliest event reported): June 19, 2008
NEXCEN
BRANDS, INC.
(Exact
Name of Registrant as Specified in Its Charter)
Delaware
(State
or
Other Jurisdiction of
Incorporation)
|
000-27707
|
20-2783217
|
|
(Commission
File Number)
|
(IRS
Employer Identification
No.)
|
| |
|
|
1330
Avenue of the Americas, 34th
Floor, New York, NY
|
10019-5400
|
|
(Address
of Principal Executive
Offices)
|
(Zip
Code)
|
(212)
277-1100
(Registrant’s
Telephone Number, Including Area Code)
(Former
Name or Former Address, if Changed Since Last Report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
| Item
1.01 |
Entry
Into a Material Definitive
Agreement
|
As
previously disclosed in a Current Report on Form 8-K filed on May 19, 2008,
NexCen Brands, Inc. (the "Company") anticipated that, based on preliminary
projections as of that date, it could face a cash shortfall in mid-to-late
June
2008 and again in August 2008 absent enhancements to its liquidity, including
changes to the frequency of cash disbursements from lockbox accounts under
its
bank borrowing facility. Since that time, the Company has been in active in
discussions with BTMU Capital Corporation, its lender, regarding possible
amendments to the bank borrowing facility.
These
discussions have resulted in a letter agreement dated June 19, 2008 (the "Letter
Agreement") among BTMU Capital Corporation ("BTMUCC"), the Company, NexCen
Holding Corporation (f/k/a NexCen Acquisition Corp.) (the "Issuer," which is
a
wholly-owned subsidiary of the Company), and the other subsidiaries of the
Issuer that are parties to the bank borrowing agreements and hold substantially
all of the Company’s intellectual property assets (other than those associated
with its Shoebox New York business). The Letter Agreement provides the Company
with limited forbearance and near-term access to certain additional cash from
its lockbox accounts while the Company continues discussions with BTMUCC
regarding a comprehensive restructuring of the terms of its bank borrowing
facility. The potential restructuring currently under discussion would include,
among other things, relief from the accelerated principal repayment obligation
that the Company faces in October 2008, which is described in the Company’s
Current Report on Form 8-K filed on May 19, 2008.
The
specific modifications provided for in the Letter Agreement include the
following:
| · |
So
long as no Default or Event of Default exists (other than those alleged
in
the Letter Agreement), the Issuer and its subsidiaries may distribute
certain cash to the Company for use in the ordinary course of business
to
support the operations of the Issuer and its
subsidiaries.
|
| · |
Monthly
(rather than quarterly) reporting will be provided to BTMUCC, and
the
Company will be permitted to receive certain cash distributions from
the
lockbox accounts on a monthly (rather than quarterly) basis, following
delivery of the required reports. These distributions are subject
to a
quarterly true-up.
|
| · |
Approximately
$400,000 currently in the Issuer's bank account and subject to
restricted
use will be released and be available to fund the Company’s ordinary
course business operations.
|
| · |
Additional
weekly and bi-weekly reports and calls regarding cash flows, cost
reductions, potential asset sales and other business matters also
will be
required.
|
In
the Letter Agreement, BTMUCC alleges that certain Defaults and Events of Default
(as defined in the existing funding and security agreements, as amended) have
occurred that would allow it to accelerate the Company’s payment and other
obligations. The Issuer and its subsidiaries have not agreed that any of the
alleged defaults constitute Events of Default. The
alleged defaults identified in the Letter Agreement relate to: non-payment
by
Designer License Holdings, LLC ("DLH") of its minimum guaranteed license
payments under its existing license agreement during 2008, delivery to BTMUCC
of
financial statements that BTMUCC contends are not accurate, and failure to
deliver to BTMUCC certain reports required under the terms of the borrowing
facility documents.
DLH
holds the license for men’s and women’s jeanswear
and other denim-related products using the Bill Blass name and marks owned
by
certain of the Company's subsidiaries.
An affiliate of DLH owns a minority interest in the Company’s Bill Blass
business. The license agreement provides for payment of quarterly minimum
royalties of $1.25 million on each January 1, April 1, July 1 and October 1.
If
these payments are not made, subject to specified notice and cure provisions,
there is a default under the license agreement and it becomes terminable. DLH
has not made the quarterly payments for the first two quarters of 2008. It
also
has not made required advertising contribution payments that the Company
estimates to be approximately $320,000 through March 31, 2008. The Company
is in
discussions with DLH regarding the payments and other aspects of the license
agreement. If the Company were to terminate the license following a default,
among other rights, it would be entitled to collect $2.5 million under a letter
of credit that is in place to collateralize DLH’s obligations under the license
agreement and to seek damages for unpaid past due amounts. In addition, the
minority interest in the Bill Blass business held by a DLH affiliate has been
pledged as additional collateral for DLH’s obligations under the license
agreement. The Company cannot predict the outcome of its discussions with
DLH.
BTMUCC
has not waived any of its rights with respect to the alleged defaults. The
Letter Agreement will continue in effect, and the Company and its subsidiaries
will have the right to gain access to and use of certain additional cash in
accordance with the terms thereof, until the earlier of (i) July 17, 2008 and
(ii) the occurrence of any Default or Event of Default other than the alleged
defaults specified in the Letter Agreement.
The
Company is working to reach agreement with BTMUCC on a comprehensive
restructuring of the borrowing facility on or before July 17, 2008. No such
agreement has yet been reached, and there can be no assurance that any agreement
will be reached and approved by the parties by July 17, 2008, or at all, on
terms that will provide the Company with the additional liquidity it needs
to
operate its business.
The
foregoing summary of the terms and conditions of the Letter Agreement does
not
purport to be complete and is qualified in its entirety by reference to the
full
text of the Agreement attached as Exhibit 10.1 hereto, and which is incorporated
herein by reference. A copy of the press release announcing the Letter Agreement
is attached hereto as Exhibit 99.1 and is incorporated herein by
reference.
| Item
2.04 |
Triggering
Events that Accelerate or Increase a Direct Financial Obligation
or An
Obligation under an Off-Balance Sheet
Arrangement.
|
See
the
discussion under Item 1.01 above regarding alleged Events of Default under
the
Company’s bank borrowing agreements and the forbearance provided by the
Company’s lender under the Letter Agreement.
As
previously announced, the Company has engaged N M Rothschild & Sons Limited
to advise it in exploring strategic alternatives, including the possible sale
of
one or more of its businesses. While the Company continues to review a wide
range of options that may be available to enhance
its liquidity, it is currently focusing its efforts on restructuring its
borrowing facility with BTMUCC, reducing operating expenses, and exploring
the
possible sale of its Bill Blass and Waverly brands. If the Company were to
sell
these brands, it expects that it would focus its continuing business on
franchise operations. The Company has received numerous expressions of interest
in both the Bill Blass and Waverly brands from domestic and international
strategic and financial buyers and is working with Rothschild to evaluate
possible transactions. No decision has been made to sell any particular
business, and there can be no assurance that any sale will be
completed.
Also,
since the Company announced a staffing reduction on May 30, 2008 at its New
York
headquarters, the Company has also reduced its staffing in its Norcross, Georgia
operations. As
a result of these additional changes, the Company has eliminated approximately
8.0% of its Georgia-based workforce. These new reductions in payroll are
expected to reduce cash outlays by approximately $600,000 on an annualized
basis, and additional expense savings are anticipated.
As
part of the lockbox
accounts under the Company's bank borrowing facility
requirements, subsidiaries of the Company entered into customary deposit control
agreements with its principal commercial bank, Bank of America. Following the
Company's announcement in May of potential cash short-falls, Bank of America
advised the Company that it would terminate the deposit agreements and other
treasury management services that it provides to the Company as of July 9,
2008.
The Company has been in active discussions with Bank of America to maintain
the
deposit control agreements. If the Company is required to transition the deposit
accounts to another commercial bank, it would cause significant disruptions
to
the Company's operations and potential disruptions to its bank borrowing
facility, which may result in defaults or an Event of Default under the
existing
funding and security agreements.
This
Current Report on Form 8-K contains "forward-looking statements," as such term
is used in the Securities Exchange Act of 1934, as amended. Such forward-looking
statements include those regarding expected cost savings, expectations for
the
future performance of our brands or expectations regarding the impact of recent
developments on our business. When used herein, the words "anticipate,"
"believe," "estimate," "intend," "may," "will," "expect" and similar expressions
as they relate to the Company or its management are intended to identify such
forward-looking statements. Forward-looking statements are based on current
expectations and assumptions, which are subject to risks and uncertainties.
They
are not guarantees of future performance or results. The Company's actual
results, performance or achievements could differ materially from the results
expressed in, or implied by, these forward-looking statements. Factors that
could cause or contribute to such differences include: (1) we may not be able
to
restructure our existing bank borrowing facility to provide our business with
needed liquidity, (2) other potential alternatives to seek additional liquidity,
such as selling one or more of our businesses, may not be successful or may
not
generate sufficient proceeds to meet our liquidity needs, including our debt
service obligations, (3) the businesses that we have acquired may not be
successful, may involve unanticipated costs or difficulties or delays in being
integrated with our existing operations, or may disrupt our existing operations,
(4) we may not be successful in operating or expanding our brands or integrating
our acquisitions into our overall business strategy, (5) any failure to meet
our
debt obligations would adversely affect our business and financial conditions,
and our need for additional near-term liquidity could result in a sale of one
or
more of our businesses at less than an optimal price or an inability to continue
to operate one or more of our businesses, (6) our marketing, licensing and
franchising concepts and programs may not result in increased revenues,
expansion of our franchise network or increased value for our trademarks and
franchised brands, (7) we depend on the success of our licensees and franchisees
for future growth, (8) our near-term liquidity needs and the impact of our
failure to file our required periodic reports on a timely basis may adversely
affect our ability to retain existing, or attract new, employees, franchisees,
and licenses, (9) our near term liquidity needs may be higher or lower than
our
current expectations and (10) other factors discussed in our filings with the
Securities and Exchange Commission. The Company undertakes no obligation to
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
| Item
9.01 |
Financial
Statements and Exhibits
|
|
|
10.1 |
Letter
Agreement dated June 19, 2008 with BTMU Capital
Corporation
|
|
|
99.1 |
Press
release dated June 20, 2008
|
SIGNATURES
According
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized on June 20, 2008.
| |
|
NEXCEN
BRANDS,
INC. |
|
|
|
| |
|
/s/ Kenneth
J. Hall |
| |
By:
Kenneth
J. Hall |
| |
Its: Executive
Vice President, Chief Financial
Officer and Treasurer
|