Cherokee Inc (NASDAQ: CHKE) is seeing strong gains early on in the trading session this morning, and for good reason. The company announced debt refinancing that puts it on a stronger financial foundation. Of course, the news excited investors who are pushing the stock toward the top. Today, we’ll talk about:
- The debt refinancing;
- what we’re seeing from CHKE as a result; and
- what we’ll be watching with regard to the stock ahead.
CHKE Announces Debt Refinancing
As mentioned above, Cherokee Global Brands is having an incredibly strong start to the trading session this morning as news breaks surrounding debt refinancing. In a press release issued early this morning, the company announced that it has replaced its former credit facility with a new $40 million three-year financing agreement with Gordon Brothers Finance Company, Gordon Brothers, and new subordinated promissory notes with existing subordinated lenders.
In the release, CHKE said that as a result of the refinancing, the company’s senior lender has been replaced. Also, holders of junior participation interests in the company’s former credit facility have increased their subordinated interests by $2 million. The company said that it has increased its debt from $45.2 million to $53.5 million. As a result, after discounts and issuance costs, the company has increased its liquidity by approximately $5.5 million. Finally, the company said it issued warrants to purchase about 2.8 million shares of common stock to the senior and junior lenders at an average exercise price of $0.48 per share. In a statement, Henry Stupp, CEO at CHKE, had the following to offer:
Completing this refinancing on favorable terms marks a significant step forward for the company and our global licensing partners and shareholders… The new facility increases our financial flexibility, adding over $5 million in liquidity which will support the company’s ability to realize its strategic objectives. Since the start of fiscal 2019, we have hit several benchmarks, including strengthening of our management team, successfully refining our operations and divesting non-royalty businesses. We are now better positioned to realize the full potential of our high-growth brand opportunities with the support of this more focused and efficient infrastructure. On behalf of my associates and our board of directors, I offer thanks to key stakeholders and licensees and retail partners who remained committed to Cherokee Global Brands’ success throughout this process.
What We’re Seeing From The Stock
One of the first lessons that we learn when we start to dig into the market is that the news leads to moves. In the case of CHKE, the news proved to be overwhelmingly positive. After all, with the debt restructuring in mind, the company has laid a strong financial foundation that led to increased liquidity. Of course, the news excited investors who are sending the stock screaming for the top. As is almost always the case, our partners at Trade Ideas were the first to alert us to the gains. At the moment (9:42), CHKE is trading at $0.76 per share after a gain of $0.32 per share or 70.86% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on CHKE. In particular, we’re interested in following the story surrounding the company’s growth after the debt restructuring announcement made today. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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