Business Context and Reporting Period
This Form 6-K filing by Naked Brand Group Limited (the "Company") covers the month of March 2020, specifically dated March 12, 2020. The filing reports the entry into a Material Definitive Agreement involving an amendment and restatement of the Company's credit facility with Bank of New Zealand. The Company operates through its subsidiary, Bendon Limited, as the primary borrower.
Key Financial Metrics and Debt Structure
The filing details the terms of the Restated Agreement effective March 12, 2020, which governs the Company's debt obligations:
- Revolving Credit Facility: The facility limit is NZ$16.7 million (approximately US$10.5 million). The outstanding principal balance is currently at the maximum limit of NZ$16.7 million.
- Instrument Facility: The facility limit is NZ$1.345 million (approximately US$0.846 million) for letters of credit, bank guarantees, and performance bonds.
- Repayment Schedule: The Borrower is required to reduce indebtedness by an aggregate of NZ$7.0 million (approximately US$4.4 million) in installments between March 31, 2020, and November 30, 2021.
- Termination Date: The facilities terminate on March 12, 2022.
- Interest Rate: Drawings in New Zealand dollars bear interest based on the NZ bank bill reference rate plus a liquidity premium, a business basis premium (if applicable), and a fixed margin of 2.00% per annum.
- Fees: A one-time establishment fee of 3% of the aggregate facility limit and an annual line fee of 2% of the aggregate facility limit are payable to the Lender.
The filing does not provide specific revenue, profit, cash flow, or margin figures for the reporting period.
Material Changes Versus Prior Period
The primary material change is the amendment and restatement of the Facility Agreement originally dated June 27, 2016. Key changes include:
- Formalization of the current outstanding balance of NZ$16.7 million under the Revolving Facility.
- Implementation of a mandatory debt reduction schedule requiring a NZ$7.0 million paydown over approximately 20 months.
- Establishment of specific financial covenants regarding sales/gross profit variance and inventory-to-debt ratios.
Guidance, Covenants, and Risks
The Restated Agreement includes significant financial covenants and risk factors that investors should note:
- Financial Covenants:
- Sales and gross profit must not vary adversely by more than 15% from the Company's budget for any calendar month in the 12-month period preceding each fiscal quarter end.
- The ratio of inventory to debt under the Revolving Facility must exceed 1.35 times until July 31, 2020, and 1.65 times thereafter.
- Negative Covenants: Restrictions are placed on creating new security interests, disposing of substantial property, incurring additional finance debt, making distributions, engaging in related party transactions, and undergoing mergers or changes in control.
- Events of Default: Include failure to pay, breach of covenants, insolvency, material adverse change, or changes in control. Upon default, the Lender may cancel the facility, demand immediate repayment, and foreclose on security interests. A default interest rate of 2.00% per annum above the standard rate applies to overdue amounts.
- Security: Obligations are secured by a general security interest over the assets of the Borrower, the Company, and certain Guarantors.
Investor Verification Checklist
- Verify the Company's current inventory levels against the NZ$16.7 million debt to ensure compliance with the 1.35x inventory-to-debt covenant.
- Confirm the Company's budgeted sales and gross profit figures to assess the risk of breaching the 15% variance covenant.
- Review the Company's cash flow projections to ensure it can meet the mandatory NZ$7.0 million debt reduction installments starting March 31, 2020.
- Examine the full text of the Deed of Amendment and Restatement (Exhibit 10.1) for specific definitions of "material adverse change" and permitted exceptions to covenants.
- Monitor the Company's ability to service the 2.00% fixed margin plus variable rates on the fully drawn NZ$16.7 million facility.