London Fog, creditors make deal

March 31, 1995|By Ross Hetrick | Ross Hetrick,Sun Staff Writer

London Fog Corp. announced today that it would turn over an 80 percent stake in the company to its lenders in an agreement that saves it from the threat of bankruptcy.

The financing agreement, reached with a syndicate of 23 banks headed by Chemical Bank, also provides for a new $120-million, two-year line of credit for the Eldersburg-based raincoat company. The money would be used for working capital and to support letters of credit used to purchase its garments.

"This agreement will provide the financing necessary for the company to fulfill all of our commitments to our retailers and suppliers and to assist us in overcoming the financial and operating problems we encountered last year," said Robert E. Gregory Jr., chairman and chief executive officer of London Fog.

The agreement also shaves $106.4 million off the company's existing debt of $317.4 million. In exchange, its banks will receive a new issue of voting preferred stock of equal value.

The remaining $211 million in bank debt will be converted into a seven-year, $175-million term loan and a seven-year $36 million note.

In exchange for accepting the preferred stock and extending the loan, the banks will own 80 percent of the company's equity -- leaving only 20 percent to the current owners of the company.

London Fog is currently owned by Merrill Lynch Capital Partners, which holds a 58 percent share, and GKH Partners, a Chicago investment group, which holds 36 percent of the equity.

The banks will also elect four members of a new seven-person board of directors and current owners will have the right to elect two members. The seventh member will be selected by the company's management.

Mr. Gregory, a well-known turn-around executive, was brought in three months ago to salvage the country's premier raincoat company with $350 million in annual sales.

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