Cherokee Global Brands has amended its credit facility with Cerberus Business Finance, sending the company’s stock up more than 10 percent.
The Sherman Oaks apparel licensing company entered into a forbearance agreement with Cerberus on June 27, according to Securities and Exchange Committee filings. Forbearance allows a debtor to temporarily stop paying on the debt.
Cherokee Chief Executive Henry Stupp cited challenges related to the company’s international purchase of Hi-Tec Sports, a Dutch footwear company, as the reason for entering forbearance. As part of its new agreement, Cherokee plans to pay Cerberus with the proceeds of a stock purchase agreement with major investors. The company will issue about 950,000 shares of common stock at $4.22 a share for net proceeds of about $4 million. The deal will close on Aug. 18, Cherokee said.
“We ... appreciate (Cerberus’) continued confidence in Cherokee Global Brands,” Stupp said in a statement. “While the financial integration of the Hi-Tec acquisition was difficult given the complexities of its foreign operations, we have taken the necessary steps to resolve these matters.”
Cherokee’s stock price fell dramatically in early July after the company announced a surprise first-quarter loss and disclosed that it had entered talks with Cerberus to amend its credit facility. The company reported a loss of $900,000 (-7 cents a share) for the first fiscal quarter of 2018; Wall Street analysts on average had expected earnings of 13 cents a share.
On Monday Cherokee (CHKE) shares rose 45 cents, or nearly 11 percent, to close at $4.55 on the Nasdaq.