Iconix Brand Group Inc (NASDAQ: ICON) is having an overwhelmingly strong day in the market today after issuing a press release announcing that it has bolstered its balance sheet through agreements with note holders. Of course, this led to excitement among investors, causing the stock to make a run for the top. Today, we’ll talk about the agreements, what we’re seeing from the stock, and what we’ll be watching for with regard to ICON ahead.
ICON Gains On Bolstered Balance Sheet
Under the terms of the agreement, the note holders have agreed to exchange their 2018 Convertible Notes for new senior subordinated convertible notes and cash payments representing accrued but unpaid interest on the 2018 Convertible Notes. The conversion will take place at a rate of $1,000 of New Convertible notes for $1,000 of 2018 Convertible Notes.
Also, in the release, ICON said that it has the option to increase the principal amount of 2018 Convertible Notes participating in the exchange from $110 million to up to $125 million. The exchange is expected to close on or about February 22, 2018. The new convertible notes that the 2018 Convertible NOtes will be exchanged for will mature in August of 2023 and come at a rate of 5.75% per annum. These notes will be secured by the same assets that secure the obligations of IBG Borrower LLC, a wholly-owned subsidiary of ICON. In a statement, John Haugh, CEO at ICON, had the following to offer:
These exchange transactions are part of the Company’s strategy to satisfy near-term debt obligations and represent a positive step in improving our balance sheet. We are also announcing a cost savings initiative to improve our profitability and free cash flow. With the reduction in near-term debt from this exchange satisfying a significant condition to the availability of our delayed draw term loan and the cost savings that have been identified, we are now in a good position to finalize the solution for the balance of our upcoming debt obligations.
From a business operations standpoint, we are reaffirming our 2017 revenue and non GAAP earnings per share guidance and we are pleased to highlight recent announcements of Starter with Amazon and Umbro with Target as evidence that we are making progress ensuring our brands are with the right long-term partners to maximize market presence and contribution to Iconix.
What We’re Seeing From The Stock
As investors, one of the first lessons we learn is that the news moves the market. In this particular case, the news proves to be overwhelmingly positive. After all, this transaction makes the balance sheet at Iconix Brand Group far more appealing. So, it’s no surprise to be seeing strong gains in the value of the stock today. As is almost always the case, our partners at Trade Ideas were the first to alert us to the gains. At the moment (10:20), ICON is trading at $1.77 per share after a gain of $0.52 per share or 41.60% 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 ICON. In particular, we’re interested in following the story surrounding the company’s improved financial position and closing of this exchange. We’re also interested in following the continued uptake of the company’s brands with major online and brick and mortar retailers. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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