Abandon debt offer, Sun Capital tells Kellwood

US: Abandon debt offer, Sun Capital tells Kellwood

By just-style.com | 11 January 2008

The row between branded apparel group Kellwood and shareholder Sun Capital Securities has been reignited after Sun called on Kellwood to terminate its US$60m debt tender offer.

Kellwood, which rejected two $544m takeover offers from second largest shareholder Sun Capital late last year, instituted the debt tender offer following its sale of Smart Shirts earlier this week for a total of $162m.

The company pledged to use the proceeds to repurchase shares and reduce debt, but its plans to do the latter drew a critical response from Sun Capital, which called the plan "irresponsible".

In a letter to Kellwood signed by Sun Capital vice president Jason Bernzweig, the company claims: "The bond tender, if completed, would be destructive to equity value and would represent a direct transfer of value from your shareholders to bondholders."

Instead, says Sun Capital, Kellwood should leave the debt outstanding, distribute the proceeds to shareholders and refinance the debt notes at a later date.

The alternative, it suggests, is to put the company up for sale.

Responding, Kellwood said the company's revolving debt facility was adequate to fund the company's growth plans at a lower cost than the debt to be repurchased.

"The Board believes that buying back stock and maintaining an appropriate capital structure delivers significant value to our shareholders," Kellwood said.

"The Board, the company and its independent advisors have carefully evaluated the best uses for its cash and Kellwood is confident that its plans will advance shareholder value."

Sectors: Apparel, Finance

Companies: Kellwood, Smart Shirts