The Children’s Place, Inc. (Nasdaq: PLCE), an
omni-channel children’s specialty portfolio of brands with an
industry-leading digital-first model, today announced a new
financing agreement with its majority shareholder Mithaq Capital
SPC (“Mithaq”) to provide $78.6 million of interest-free, unsecured
and subordinated term loans to strengthen the Company’s liquidity
position.
The Company also announced the appointment of
four persons nominated by Mithaq to its Board of Directors (“the
Board”): Turki Saleh A. AlRajhi, Muhammad Asif Seemab, Muhammad
Umair and Hussan Arshad. In conjunction with these appointments,
current directors Elizabeth Boland, Alicia Enciso, Katherine
Kountze and Wesley McDonald have resigned from the Company’s
ten-member Board. Mr. AlRajhi has been appointed Chairman-Elect and
is sharing the Chairman's duties with Norman Matthews during a
transition period.
Additionally, the Board has formed a special
committee – the Efficiency and Optimization Committee – comprised
of Mithaq appointees Mr. Seemab and Mr. Umair, as well as Jane
Elfers, President and CEO and Director. The purpose of the
Committee is to identify and make recommendations to the Board with
respect to increasing business competitiveness and the efficient
cost management at the Company.
Pursuant to the financing agreement, Mithaq
provided an initial tranche of $30 million to the Company on
February 29, 2024, in the form of an interest-free, unsecured and
subordinated term loan (the “Initial Mithaq Term Loan”). Mithaq
will also provide an additional $48.6 million interest-free,
unsecured and subordinated term loan to the Company (the “Second
Mithaq Term Loan” and together with the Initial Mithaq Term Loan,
the “Mithaq Term Loans”) on or before March 29, 2024, subject to
certain conditions. Upon funding of the Second Mithaq Term Loan, at
least four of the remaining non-Mithaq appointed directors will
resign and directors appointed by Mithaq will comprise a majority
of the Board of Directors. The Company has secured certain minority
shareholder protections. In addition, the governance agreement(s)
require supermajority Board of Directors authorization for certain
actions to be taken by the Company during the initial transition
period.
The Company expects to be in a position to close
the previously announced $130 million term loan (the “Gordon
Brothers Term Loan”) in March 2024, as contemplated by the
non-binding term sheet that the Company entered into with 1903P
Loan Agent, LLC, and is continuing to pursue alternative financing
on terms no less favorable in the aggregate to the Company.
Turki Saleh A. AlRajhi, Chairman and CEO of
Mithaq, commented, “We are pleased to have reached this agreement,
which provides substantial interest-free and unsecured funds to
deliver products during the critical back-to-school season. I am
also delighted to join The Children's Place Board as
Chairman-Elect, and am grateful to the management team and the
Board for their trust. l am fully committed to representing all
fellow shareholders with unshakeable reliability.”
Mr. AlRajhi concluded: “We are taking the steps
announced today to protect and compound at a reasonable rate of
return the per-share intrinsic value of the total equity value for
all fellow shareholders, with whom we are fully aligned. Our more
than 54% equity stake in the Company demonstrates our belief that
this can be accomplished.”
As the Company continues to work to improve its
liquidity position and strengthen its balance sheet, certain of its
vendors and service providers material to the business have
informed the Company that they have halted or plan to halt service
to the Company as a result of delayed payments. The Company is in
ongoing dialogue with its vendors and service providers regarding
paths forward to ensure continued service, and plans to use a
portion of the proceeds from the financings described above to
support operations, including payments to vendors and service
providers to address overdue accounts payable.
As previously disclosed, Mithaq’s acquisition of
the Company’s common stock triggered a change of control, thereby
causing a default under the Company’s Amended and Restated Credit
Agreement (the “Credit Agreement”) with its bank lenders. As a
result of this default, the Company is currently subject to cash
dominion. The Company and its bank lenders have agreed to a
forbearance agreement (the “Forbearance Agreement”) that, among
other things, permits the Company’s entry into the Mithaq Term
Loans and pursuant to which the bank lenders have agreed to forbear
from exercising certain rights and remedies under the Credit
Agreement with respect to the above-mentioned default during a
limited forbearance period. The Forbearance Agreement contemplates
a permanent waiver of the change of control default upon the
satisfaction of certain conditions, including the Company’s receipt
of proceeds from the financings described above.
The financings are subject to customary closing
conditions. Additional details concerning the Mithaq Term Loans and
the Forbearance Agreement may be found in the Form 8-K that is
planned to be filed by the Company with the Securities and Exchange
Commission on February 29, 2024.
About The Children’s PlaceThe
Children’s Place is an omni-channel children’s specialty portfolio
of brands with an industry-leading digital-first model. Its global
retail and wholesale network includes four digital storefronts,
more than 500 stores in North America, wholesale marketplaces and
distribution in 16 countries through six international franchise
partners. The Children’s Place is proud to be a women-led Company,
including industry-leading gender diversity in senior management
and throughout all levels of its workforce, and of its commitment
to sustainable business practices that benefit its customers,
associates, investors, suppliers and the communities it serves. The
Children’s Place designs, contracts to manufacture, and sells
fashionable, high-quality apparel, accessories and footwear
predominantly at value prices, primarily under its proprietary
brands: “The Children’s Place”, “Gymboree”, “Sugar & Jade”, and
“PJ Place”. For more information, visit: www.childrensplace.com and
www.gymboree.com as well as the Company’s social media channels on
Instagram, Facebook, X, formerly known as Twitter, YouTube and
Pinterest.
About MithaqMithaq Capital SPC
is an affiliate of Mithaq Holding Company, a decentralized family
office headquartered in Saudi Arabia with investments in public
equities, private equities, real estate, and income-producing
assets in local and international markets. Mithaq follows a
disciplined value investing approach with margin-of-safety as a
principle. Mithaq is a strategic long-term shareholder with a
history of owning high-quality businesses, supporting first-class
management teams, and championing long-standing partnerships based
primarily on trust. Mithaq is a segregated portfolio company
existing under the laws of the Cayman Islands. For further
information, visit www.mithaqholding.com.
Forward-Looking Statements This
press release contains or may contain forward-looking statements
made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, including but not limited
to statements relating to the Mithaq Term Loans, the Gordon
Brothers Term Loan, the Forbearance Agreement and the Governance
Agreement. Forward-looking statements typically are identified by
use of terms such as “may,” “will,” “should,” “plan,” “project,”
“expect,” “anticipate,” “estimate” and similar words, although some
forward-looking statements are expressed differently. These
forward-looking statements are based upon the Company’s current
expectations and assumptions and are subject to various risks and
uncertainties that could cause actual results and performance to
differ materially. Some of these risks and uncertainties are
described in the Company’s filings with the Securities and Exchange
Commission, including in the “Risk Factors” section of its annual
report on Form 10-K for the fiscal year ended January 28, 2023.
Included among the risks and uncertainties that could cause actual
results and performance to differ materially are the risk that the
Company will be unsuccessful in gauging fashion trends and changing
consumer preferences, the risks resulting from the highly
competitive nature of the Company’s business and its dependence on
consumer spending patterns, which may be affected by changes in
economic conditions (including inflation), the risks related to the
COVID-19 pandemic, including the impact of the COVID-19 pandemic on
our business or the economy in general, the risk that the Company’s
strategic initiatives to increase sales and margin are delayed or
do not result in anticipated improvements, the risk of delays,
interruptions, disruptions and higher costs in the Company’s global
supply chain, including resulting from COVID-19 or other disease
outbreaks, foreign sources of supply in less developed countries,
more politically unstable countries, or countries where vendors
fail to comply with industry standards or ethical business
practices, including the use of forced, indentured or child labor,
the risk that the cost of raw materials or energy prices will
increase beyond current expectations or that the Company is unable
to offset cost increases through value engineering or price
increases, various types of litigation, including class action
litigations brought under consumer protection, employment, and
privacy and information security laws and regulations, the
imposition of regulations affecting the importation of
foreign-produced merchandise, including duties and tariffs, the
uncertainty of weather patterns, the risk that we may be unable to
consummate the Term Loans as anticipated, or at all, or obtain
alternative financing. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as
of the date they were made. The Company undertakes no obligation to
release publicly any revisions to these forward-looking statements
that may be made to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
The Children’s Place Contact: Investor
Relations (201) 558-2400 ext. 14500
Mithaq Contact:
mithaq-capital@mithaqholding.com
Media Contact: Mithaq@Longacresquare.com
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