Iconic fashion house BCBG Max Azria is setting off on a last ditch effort to avoid bankruptcy. As I wrote last, the company has a $20 million March loan payment due which it will find next to impossible to make. As a result, market sources report BCBG has decided to launch a tender offer for its secured term loan at a huge discount, in the 30-40 cent ballpark. As the illiquid loan was last offered at 42 according to loan connector, management will need to step up the repurchase price for the tender to be attractive.
An earlier amendment, which had increased the interest on the loan to L+750 of which L+300 is PIKing, allowed discounted loan buy backs.
By launching this tender, the company puts itself at the mercy of its lenders. If the later perceive the company's asset value is higher than the $10 million BCBG is willing to spend on the buyback, they may simply wait until the company is forced to default and equitize their loan interest and take over the company with no debt overhang.
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