Bendon’s owner Naked seeks $26 million by July
AUCKLAND: Bendon’s Nasdaqlisted owner Naked Brand Group’s former route to a bailout — former Bendon owner Eric Watson — is closed as it seeks to raise another $26 million by July.
Having breached its loan terms with Bank of New Zealand yet again, Naked cannot go back to Mr Watson, whose Cullen Group has injected capital but is now dealing with its own issues.
Lingerie firm Naked’s solvency remains a live question, with directors saying there is ‘‘substantial doubt’’ it can operate as a going concern.
If it can, it needs to raise at least $26 million by July, cut costs and fatten margins to achieve a positive cash flow by October, and renegotiate banking arrangements and creditors’ terms.
Naked is operating with negative working capital after breaching the terms of its banking covenants and BNZ has the $20 million facility under review. Bendon was often in breach of its loan terms with BNZ, and it was only an effective guarantee from Watson’s Cullen Group that prevented the funding line shrinking to just $10 million after the June merger with
Naked to reverselist Bendon.
Bendon had already drawn on Mr Watson’s fortune during the drawnout Naked transaction, it providing capital in the form of convertible notes and shareholder loans with high interest rates.
However, after multiple claims, Mr Watson has sold assets and dialled back his domestic exposure.
Inland Revenue is pursuing Mr Watson’s vehicle for almost $60 million of what it claims are unpaid taxes, plus interest and penalties.
Former business partner Owen Glenn is seeking to enforce an English court judgement for
$50 million against Mr Watson after their acrimonious falling out.
Naked directors say they have been told that ‘‘due to some changes with Cullen’s financial circumstances, Cullen is not likely to be a reliable source of funding and, as a result, the directors have decided to pursue new capital raising activities and not rely on Cullen’’.
The company said management has already started exploring ways to raise capital for new inventory, and has restructured the business to cut distribution costs and renegotiate supply arrangements.
Naked said it will take some time before those initiatives improve the business, and it put off holding an investor briefing on its firsthalf earnings on December 20 until this year.
Naked needs the funding to restock depleted inventory, the lack of which it blamed for a 5.1% decline in revenue to
$56.8 million in the six months ended July 31, and a 9.7% drop in gross profit to $17.7 million, accounts filed with the US Securities and Exchange Commission show.
Its firsthalf loss widened to $26.1 million.
The lingeriemaker started the half year knowing it had inventory issues.
Its licence to sell Stella McCartney products ended on June 30, and it hoped to replace that with FOH Online — the Watsonowned global ecommerce licensee for Frederick’s of Hollywood.
A sale was closed last month for $US18.2 million, although no cash changed hands; Naked forgave $NZ12.8 million of debt owed by FOH and Cullen, and issued almost 3.8 million Naked shares to FOH’s vendors.
Those shares were priced at $US2.20 apiece, a substantial premium to the $US1.14 price at the time. Since then, Naked’s stock has plunged, dropping from $US1.10 on December 19, before it released its firsthalf results, to just 83c at Friday’s New York close, valuing Naked at just $US21.6 million. — BusinessDesk