The Children's Place, Inc. (NASDAQ: PLCE) shares have been seeing a significant increase of 25.46% during current trades, hitting a price of $8.92 per share. The abrupt increase in value is ascribed to the disclosure of a financing arrangement, which provided a noteworthy catalyst for the impressive rise in PLCE shares.
Today, The Children's Place (PLCE) unveiled a new financing agreement with its principal shareholder, Mithaq Capital SPC. This agreement entails an unsecured and subordinated $90 million term loan, scheduled for disbursement no later than April 19, 2024 (referred to as the "New Mithaq Term Loan").
The New Mithaq Term Loan is poised to bolster PLCE's liquidity position on more favorable terms compared to the previously envisaged term loan outlined in the non-binding term sheet with 1903P Loan Agent, LLC. Consequently, The Children's Place has opted not to pursue the Proposed Term Loan any further.
The proceeds from the New Mithaq Term Loan are earmarked for several purposes, including the repayment of the Company's existing $50 million term loan under the Amended and Restated Credit Agreement dated May 9, 2019, the reduction of certain accounts payable balances with vendors, and allocation towards general corporate needs.
On April 16, 2027, the New Mithaq Term Loan is scheduled to maturity. Interest will be charged at the Secured Overnight Financing Rate, or "SOFR," plus 4.00% per year. Payments for accumulated interest will not be made until April 30, 2025.
Unlike the Proposed Term Loan, the terms of the New Mithaq Term Loan are devoid of closing, prepayment, or exit fees, typical for transactions of this nature. Furthermore, it does not entail additional reserves on borrowings under the Credit Facility, lacks certain restrictive covenants, and offers a substantially lower interest rate.
Since February 29, 2024, The Children's Place has received a total of $168.6 million in funding from Mithaq, comprising the $90 million New Mithaq Term Loan and the previously disclosed $78.6 million in interest-free, unsecured, and subordinated term loan funding.