Dive Brief:

• Struggling footwear and accessories brand Nine West will get a temporary reprieve from a loan restriction in order to get it through the all-important holiday season, sources have told Bloomberg.

• The company’s senior lenders have agreed to revise a $275 million credit facility by removing a debt covenant that limited its access to credit. Under the agreement, the financing will be split into a $250 million credit line and a $25 million term loan, which Bloomberg described as first-in, last-out, meaning the loan will be paid after the credit line is paid.

• The lenders, which include Gordon Brothers Group and Wells Fargo & Co., also agreed in August to remove a loan condition that measures the company’s ability to pay fixed charges like rent and salaries that would have tripped immediate maturation of the loan if the company missed payments. That way the company avoids the need for immediate cash and can access its credit line without the ratio restriction, Bloomberg reports.

Dive Insight:

Nine West, owned by private equity firm Sycamore Partners, is swimming in about $1.7 billion in debt. S&P and Moody’s in late August both cut its credit rating and warned that weak operations and revenue decreases could prompt another downgrade.

The company, which depends on direct retail sales as well as wholesale, is losing market share amid softening apparel sales and competition from e-commerce. Moody’s at the time noted that ”the company's capital structure is unsustainable. Thus, the company faces a heightened probability of default, including the potential for a distressed exchange.” 

Moody’s retail analyst Michael M. Zuccaro wrote in a note on the recent downgrade, “Nine West has taken corrective actions to improve profitability, such as closing underperforming stores, reducing administrative, real estate and other expenses and improving product quality. However, Moody's expects improvement will take time as challenges still persist within the company's moderate department store customer base and as well as its own retail business.”

Sycamore acquired Nine West in 2014 for $2.2 billion, along with 34 other Jones Group brands, including Anne Klein, Easy Spirit, Bandolino, Enzo Angiolini, Givenchy, Gloria Vanderbilt, l.e.i., Jessica Simpson, Jones New York, Kasper, Stuart Weitzman and Kurt Geiger. 

The firm’s investments are heavily focused on retail and consumer brands, many of which have struggled lately as sales shift online, consumers remain careful about spending and retailers scramble to adapt. Most recently Sycamore tussled with teen apparel retailer Aeropostale, which like Nine West had been weighed down with debt and failed to keep up with apparel trends. Sycamore leveraged its $150 million loan to Aeropostale in its bid for that retailer, though another group of investors led by landlords and brand companies, won the auction at bankruptcy court in September.