(1)

Does not include debt issuance costs, net of amortization, totaling $3.3 million, $5.8 million and $4.6 million as of July 31, 2020, July 31, 2019 and January 31, 2020, respectively, related to the revolving credit facility. These debt issuance costs have been deferred and are classified in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets in accordance with ASU 2015-15.

On August 7, 2020, the Company refinanced its term loan and revolving credit facility. See Note 16 – Subsequent Events.

Term Loan

The Company borrowed $350.0 million under a senior secured term loan facility (the “Term Loan”) that matures in December 2022. The Company prepaid $50.0 million in principal amount of the Term Loan, reducing the principal balance of the Term Loan to $300.0 million. The Term Loan is guaranteed by certain of the Company’s subsidiaries.

Interest on the outstanding principal amount of the Term Loan accrues at a rate equal to the London Interbank Offered Rate (“LIBOR”), subject to a 1% floor, plus an applicable margin of 5.25% or an alternate base rate (defined as the greatest of (i) the “prime rate” as published by the Wall Street Journal from time to time, (ii) the federal funds rate plus 0.5% or (iii) the LIBOR rate for a borrowing with an interest period of one month) plus 4.25%, per annum, payable in cash. As of July 31, 2020, interest under the Term Loan was being paid at a weighted average rate of 6.45% per annum.

The Term Loan is secured by certain assets of the Company and certain of its subsidiaries. The Term Loan is required to be prepaid with the proceeds of certain asset sales if such proceeds are not applied as required by the Term Loan within specified deadlines. The Term Loan contains covenants that, among other things, restrict the Company’s ability, subject to certain exceptions, to incur additional debt; incur liens; sell or dispose of certain assets; merge with other companies; liquidate or dissolve the Company; acquire other companies; make loans, advances, or guarantees; and make certain investments. This loan also includes a mandatory prepayment provision based on excess cash flow as defined in the term loan agreement. A first lien leverage covenant requires the Company to maintain a level of debt to EBITDA at a ratio as defined in the term loan agreement. As of July 31, 2020, the Company was in compliance with these covenants.

Revolving Credit Facility

The Company has a $650 million credit agreement (the “revolving credit facility”) under which amounts available are subject to borrowing base formulas and over advances as specified in the revolving credit facility agreement. Borrowings bear interest, at the Company’s option, at LIBOR plus a margin of 1.25% to 1.75% or an alternate base rate (defined as the greatest of (i) the “prime rate” of JPMorgan Chase Bank, N.A. from time to time, (ii) the federal funds rate plus 0.5% or (iii) the LIBOR rate for a borrowing with an interest period of one month) plus a margin of 0.25% to 0.75%, with the applicable margin determined based on the availability under the revolving credit facility agreement. The revolving credit facility has a five-year term ending December 1, 2021. In addition to paying interest on any outstanding borrowings under the revolving credit facility, the Company is required to pay a commitment fee to the lenders under the credit agreement with respect to the unutilized commitments. The commitment fee accrues at a rate equal to 0.25% per annum on the average daily amount of the available commitments.

The revolving credit facility is secured by specified assets of the Company and certain of its subsidiaries.

The revolving credit facility contains covenants that, among other things, restrict the Company’s ability, subject to specified exceptions, to incur additional debt; incur liens; sell or dispose of certain assets; merge with other companies; liquidate or dissolve the Company; acquire other companies; make loans, advances, or guarantees; and make certain investments. In certain circumstances, the revolving credit facility also requires the Company to maintain a fixed charge coverage ratio, as defined in the agreement, not less than 1.00 to 1.00 for each period of twelve consecutive fiscal months of the Company. As of July 31, 2020, the Company was in compliance with these covenants.

As of July 31, 2020, the Company had no borrowings outstanding under the revolving credit facility. As of July 31, 2020, interest under the revolving credit agreement was being paid at an average rate of 2.06% per annum. The revolving credit facility also includes amounts available for letters of credit. As of July 31, 2020, there were outstanding trade and standby letters of credit amounting to $7.0 million and $3.4 million, respectively.

LVMH Note

As a portion of the consideration for the acquisition of DKI, the Company issued to LVMH a junior lien secured promissory note in the principal amount of $125.0 million (the “LVMH Note”) that bears interest at the rate of 2% per year. $75.0 million of the principal amount of the LVMH Note is due and payable on June 1, 2023 and $50.0 million of such principal amount is due and payable on December 1, 2023.

ASC 820 requires the note to be recorded at fair value at issuance. As a result, the Company recorded a $40.0 million debt discount. This discount is being amortized as interest expense using the effective interest method over the term of the LVMH Note.

Unsecured Loans

On April 15, 2019, T.R.B. International SA (“TRB”), a subsidiary of Vilebrequin, borrowed €3.0 million under an unsecured loan (the “2019 Unsecured Loan”). During the term of the 2019 Unsecured Loan, TRB is required to make quarterly installment payments of €0.2 million. Interest on the outstanding principal amount of the 2019 Unsecured Loan accrues at a fixed rate equal to 1.50% per annum, payable quarterly. The 2019 Unsecured Loan originally matured on April 15, 2024. Due to the COVID-19 outbreak, the bank agreed to amend the 2019 Unsecured Loan to suspend the March and June 2020 quarterly installment payments and add these payments to the balance due at the end of the loan term. The 2019 Unsecured Loan now matures on September 15, 2024.

On February 3, 2020, TRB borrowed €1.7 million under another unsecured loan (the “February 2020 Unsecured Loan”). During the term of the February 2020 Unsecured Loan, TRB is required to make quarterly installment payments of €0.1 million. Interest on the outstanding principal amount of the February 2020 Unsecured Loan accrues at a fixed rate equal to 1.50% per annum, payable quarterly. The February 2020 Unsecured Loan originally matured on March 31, 2025. Due to the COVID-19 outbreak, the bank agreed to amend the 2020 Unsecured Loan to suspend the June 2020 quarterly installment payment and add this payment to the balance due at the end of the loan term. The February 2020 Unsecured Loan now matures on June 30, 2025.

On June 12, 2020, a subsidiary of TRB borrowed €1.5 million under a French state backed loan provided by UBS Bank (the “June 2020 Unsecured Loan”) as part of a COVID-19 relief program. The June 2020 Unsecured Loan provides for an initial one year term with the option to extend the term by an additional one to five years at the end of the initial term. The June 2020 Unsecured Loan requires no interest or principal payments during the initial term of the agreement.

Overdraft Facilities

During the second quarter of fiscal 2021, TRB entered into several overdraft facilities that allow for applicable bank accounts to be in a negative position up to a certain maximum overdraft. TRB entered into an uncommitted overdraft facility with HSBC Bank allowing for a maximum overdraft of €5 million. Interest on drawn balances accrues at a rate equal to the Euro Interbank Offered Rate plus a margin of 1.75% per annum, payable quarterly. The facility may be cancelled at any time by TRB or HSBC Bank. As part of a COVID-19 relief program, TRB and its subsidiaries have also entered into several state backed overdraft facilities with UBS Bank in Switzerland for an aggregate of CHF 4.7 million at varying interest rates of 0% to 0.5%. As of July 31, 2020, TRB had an aggregate €3.1 million drawn across these various facilities.