IKKS: creditors take control
today Jun 4, 2019
The IKKS group is fighting to start over — or such is the plan put in place by the creditors of the French business. News of the plan leaked last October which, in concrete terms, consists of an agreement between the brand’s owners (LBO France Roger Zannier, Silverfern Group, and the management team) and the bondholders. The business’ bond debt had mounted to €320 million.
In order to reduce its debt and implement a financial restructuring, an ad-hoc committee was formed in mid-2018. On June 3 this year, the business announced that it is now 100 percent owned by the former holders of the €320 million in bonds. The key principles of the agreement were finalised on December 21 last year, with 90 percent of votes in favour of the restructuring. The group clarified that these terms were validated by the Paris Commercial Court on May 14 following an accelerated financial backup.
“The support of creditors and particularly that of the ad-hoc committee has offered a new future for the group,” said Pierre-André Cauche in a statement. “Thanks to a resized debt, IKKS now has a new capacity to invest in its brands as a priority and to accelerate its growth.”
The new owners are led by the American groups Avenue Capital, Carval investors, and Marathon Asset Management. Avenue Capital, which was founded in 1995 by Marc Lasry and Sonia Gardner, is an investment fund that manages assets in the US, Europe, and Asia valued at around $10.1 billion. Carval was founded in 1987 as a subsidiary of Cargill and is now an independent entity. The business manages loans across the globe valued at around $20 billion. The two businesses both specialise in investing in businesses with outstanding debts. Marathon Asset Management, founded in 1998, is an asset management specialist and has over $15 billion worth of assets in its portfolio.
So what has the group announced? A substantial reduction of debt as well as an injection of funds to allow IKKS group’s brands I.Code and OneStep to start afresh. As part of this, €180 million of the €320 million of the original bond debt has been converted into capital. The business’ new owners have also contributed an additional €70 million to “refinance all of its short-term financing and to consolidate its treasury for its balance,” according to a statement by the business.
Cauche’s teams should be well disposed of means to exploit the capital of IKKS. The group has done quite well in terms of sales with stability in 2018 compared to 2017 and sales of €349 million. The business saw a 1.2 percent increase in retail sales which accounts for almost two thirds of its overall figure. The business also saw womenswear sales increase by 7.5 percent and its earnings before interest, tax, depreciation, and amortisation amounted to €34 million.
In the first four months of 2019, the business announced a number of sales increases: “up 4.3 percent year-on-year, an increase of 8.4 percent fro womenswear, up seven percent for I.Code, and up 5.9 percent for menswear- all adult brands have positive growth and e-commerce has seen double digit growth.”
Last autumn, Capital Finance expected that the project was targeting €394 million in revenue with €57.8 million in EBITDA in 2021. The financial media announced that the business had closed 43 unprofitable stores of its then total of 892 across Europe. Today, the business announced that it is present in 40 countries and has 850 points of sale. The brand also raised the tone with its marketing campaign last season by working with Laetitia Casta.
The business’ development plan now expects to see its international business double in the coming five years and expects its export sales to increase from 20 percent of its total revenue to 40 percent by 2024. During this time, online sales are expected to increase to 25 percent of the business’ total sales. To achieve this goal, the business has proposed five goals: “a reinvented communications strategy, a re-marketed product offering, a retail strategy with focus re-directed to operational excellence and “customer centricity” and a strategy of amplified digitisation and internal development re-launched in new geographical zones.”
In the highly competitive ready-to-wear market, IKKS wants to arm itself to deliver an omni-channel solution to its customers, especially to attract new demographics. Following the business’ takeover through debt conversion and a funding injection, it remains to be seen how the new owners will support their ambitions in the medium-term.
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