Business Context and Reporting Period
This Form 6-K filing by Naked Brand Group Limited (a foreign private issuer) covers the month of July 2020, with the report dated July 27, 2020. The filing discloses the entry into a material definitive agreement involving a private placement of debt and equity securities to an accredited investor.
Key Financial Metrics and Transaction Details
The filing details a financing transaction completed on July 24, 2020, rather than providing standard periodic financial statements (revenue, profit, or cash flow). Key transaction metrics include:
- Purchase Price: US$8.0 million paid by the investor.
- Note Principal Balance: US$8.42 million (includes US$8.0 million purchase price, 5% original issue discount, and US$20,000 in reimbursed expenses).
- Warrant Coverage: Purchase Warrant to acquire up to 19,136,364 Ordinary Shares at an exercise price of US$0.6707 per share.
- Existing Debt: As of July 24, 2020, the aggregate remaining outstanding balance of prior convertible notes was approximately US$8,875,000.
- Liquidity Impact: The transaction provides immediate capital of US$8.0 million, subject to the terms of the Note and Warrant.
Material Changes and Debt Structure
The primary material change is the issuance of a new Convertible Promissory Note and associated Warrants. The debt structure includes:
- Interest Rates: Tiered structure starting at 2.0% per annum for the first 90 days, increasing to 10.0% for the next 90 days, and 15.0% thereafter. In the event of default, the rate increases to 20.0% per annum.
- Maturity: July 24, 2022.
- Conversion Terms: Convertible at the investor's election at a price equal to the lower of US$0.44 or 80% of the closing bid price prior to the earlier of the Registration Statement effectiveness or October 31, 2020.
- Subordination: The Note is subordinated to the Company's existing senior secured credit facility with the Bank of New Zealand.
- Redemption: Upon an event of default, the investor may require redemption at 110% of the amount to be redeemed.
Guidance, Risks, and Contingencies
The filing outlines several risks and contingencies associated with the financing:
- Registration Rights Penalty: The Company must file a Registration Statement within 15 days and obtain effectiveness within 60 days. Failure to do so triggers a penalty payment of 2% of the purchase price for affected securities, payable every 30 days until cured (capped at 12 payments unless Rule 144 is unavailable).
- Conversion Limitations: Conversion or exercise is limited if the investor would beneficially own more than 9.9% of outstanding Ordinary Shares, unless "pre-funded" warrants are issued.
- Covenants: The Company is subject to affirmative and negative covenants regarding repayment of other indebtedness, payment of dividends, and asset transfers.
- Fundamental Transactions: In the event of a merger or acquisition, holders may elect to receive the same consideration as ordinary shareholders or require the Company to purchase the warrants at their Black-Scholes value.
Investor Verification Checklist
- Verify the Company's ability to file and obtain effectiveness for the Registration Statement within the 60-day deadline to avoid penalty payments.
- Confirm the current status of the US$8,875,000 in prior outstanding notes and any further conversions.
- Assess the dilution impact of the 19,136,364 warrant shares and potential conversion of the US$8.42 million note.
- Review the terms of the subordination agreement with the Bank of New Zealand to understand repayment priorities.
- Monitor the Company's compliance with negative covenants regarding dividends and additional indebtedness.