Nov 24, 2016
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Jewelry chain Charming Charlie explores debt restructuring

Nov 24, 2016

U.S. fashion jewelry and accessories budget retailer Charming Charlie LLC is seeking to hire a financial adviser to help find relief from its debt burden, according to people familiar with the matter.

Such a move would come after the 12-year-old chain failed to establish sufficient scale to compete in a highly fragmented market that has been tested by the rise of internet shopping and rapidly changing consumer tastes.

Charming Charlie rumoured to be in debt restructuring negotiations

Charming Charlie has interviewed investment banks in recent weeks to hire an adviser that would lead a restructuring process to help address its approximately $200 million debt burden, the people said this week.

The deliberations may not result in a restructuring, the people cautioned, asking not to be identified because the matter is confidential.

"In the normal course of business, the company routinely holds discussions with investment bankers and other third parties about raising equity financing or refinancing the company's existing debt to take advantage of market conditions," Charming Charlie said in a statement.

"Any implication that the company is currently operating outside of that ordinary course is completely unfounded."

Charming Charlie, founded in 2004 by entrepreneur Charlie Chanaratsopon, is known for its color-coordinated display of jewelry, handbags and apparel. Its early success put Chanaratsopon, chief executive officer and majority owner of the company, on the Forbes America's Richest Entrepreneurs Under 40 list last year, which pegged his net worth at $425 million.

Charming Charlie has had investments from private equity firms TSG Consumer Partners and Hancock Park Associates.

The Houston-based retailer has about 350 stores across the United States and internationally, including in Saudi Arabia, the United Arab Emirates and the Philippines. It opened a bright pink store on New York's pricey Fifth Avenue last year.

"While Charming Charlie has meaningfully grown its business over the last two years, much of the revenue growth can be attributed to new store expansion," credit ratings agency Moody's Investors Service Inc said last year, noting that the chain had added 79 new stores since 2013.

Earlier this year, Charming Charlie's lenders granted the retailer an amendment to its credit agreement, giving it breathing room under its loan rules, according to credit ratings agency Standard & Poor's. The ratings agency warned in May that Charming Charlie may have to go back to its lenders for more help.

Charming Charlie's $150 million term loan was trading below face value this week, indicating investor doubts about receiving full repayment. The loan was quoted at around 64 cents on the dollar on Tuesday, according to the most recent Thomson Reuters data available.

The fragmented jewelry market has already caused struggles at Charming Charlie competitor Claire's Stores, which began negotiating debt restructuring talks with its creditors this year.


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