Phoenix Footwear is to sell assets of its private label accessories business Chambers to Tandy Brands Accessories.

Under the terms of the transaction, Tandy will purchase Chambers' manufacturing equipment, certain inventory at cost, certain intellectual property and customer relationships.

It is expected that Tandy will also hire certain individuals to assist in transitioning customer relationships and related revenue.

As part of the purchase price, Tandy will pay US$500,000 plus acquired inventory costs in immediately available funds at closing and a percentage of the revenue generated by this business in the 12 months following the closing (including a $430,000 advance payment in immediately available funds at closing).

In a statement, Phoenix said that based in part on the full implementation of this transaction, the company expects to be able to fully extinguish its outstanding bank debt during fiscal 2009.

The exclusive Wrangler licenses held by Phoenix's Chambers division for leather belts and accessories terminate at the end of this year for the mass market; and at the end of 2010 for the western market.

"Wrangler Apparel, Inc has advised Phoenix of its intent to directly enter the accessories business and take in-house and not renew its Wrangler mass license. These licenses have historically been the basis of a substantial portion of Chambers' revenue. In the wake of this development, Phoenix decided to sell its private label accessories business and certain assets to Tandy Brands Accessories, Inc," a statement said.

The assets being sold do not include Chambers' cash and cash equivalents or accounts receivables. After the closing, Chambers plans to collect these receivables. Following the closing, Phoenix plans to wind down Chambers' remaining operation as the Wrangler licenses expire unrenewed.

As part of the Tandy transaction, at closing Tandy and Chambers may enter into a manufacturing and supply agreement which would provide Chambers with the ability to purchase product to fulfill Wrangler orders during the remaining term of the license agreement.

Phoenix previously announced that it exited its Tommy Bahama license. Since that announcement, Phoenix has completed the liquidation of its TB inventory and ceased related operations. After collecting its outstanding receivables and paying related exit costs, Phoenix expects the wind down of this business to generate net proceeds of approximately $2.5m.

On a combined basis the Chambers and Tandy transactions are expected to generate net cash in excess of $14m when fully implemented and should allow Phoenix to extinguish its outstanding bank debt in full.