European Lingerie Group AB (“ELG” or “Company” and together with its subsidiaries from time to time, the “Group”) has previously announced that on 29 July 2020, ELG and its principal shareholders reached a standstill agreement and signed a standstill letter (“Standstill Letter”) with certain holders of the Bonds, today representing over 64 per cent of the Total Nominal Amount of the Bonds (the “Bondholder Committee“)*, regarding ELG’s defaults under the Terms and Conditions and also announced a cooperation between ELG and the Bondholder Committee to explore and execute a potential restructuring of the Group and the Bonds, with regard to the terms and conditions (the “Terms and Conditions“) for ELG’s up to EUR 60,000,000 (of which EUR 40,000,000 has been issued and is outstanding) senior secured floating rate bonds due 2021 with ISIN SE0010831792 (the “Bonds“). Capitalised terms used but not defined herein shall have the meanings assigned to them in the Terms and Conditions. The standstill period has been prolonged at several occasions.

ELG hereby informs that today ELG, its subsidiaries SIA European Lingerie Group (“SIA ELG”) and LAUMA Fabrics SIA (“Lauma Fabrics” and together with SIA ELG, the “Co-Borrowers”), its major shareholders Helike Holdings OÜ and Bryum Capital Ltd, the Bondholder Committee, AS Rietumu Banka (the “Bank”) as lender and its affiliated company RB ELG SIA (the “Investor”) as equity investor have agreed on a restructuring of ELG and its Bonds under which the Bonds will be repaid with EUR 21,000,000 in cash and the remaining nominal amount of EUR 19,000,000 of the Bonds plus accrued and unpaid interest will be written down to zero. The restructuring is subject to approval by the holders of the Bonds through a written procedure in accordance with the Terms and Conditions, which will be initiated within 5 business days from today. The written procedure notice will contain more detailed information with respect to the restructuring. The written procedure notice will be sent out to the holders of the Bonds in accordance with the Terms and Conditions and be published on ELG’s website (www.elg-corporate.com) and the Agent’s website (www.intertrustgroup.com/our-services/capital-markets-services/bond-news).

Each member of the Bondholder Committee has undertaken not to sell the Bonds they represent (lock-up) until the earlier of (i) when such Bondholder Committee member no longer holds any Bonds due to the restructuring, (ii) the written procedure is concluded to have rejected the restructuring and (iii) 15 June 2021 (“Lock-up Period”). Each member of the Bondholder Committee shall however be entitled to sell the Bonds they represent during the Lock-up Period if the seller of any Bonds ensures that the purchaser of such Bonds accedes to the undertakings in the MTA (as defined below). Furthermore, each member of the Bondholder Committee has irrevocably and unconditionally undertaken to vote and/or undertaken to ensure that the holding of Bonds they represent vote in favour of the restructuring as set out in the written procedure.

Closing of the restructuring, including repayment to the holders of the Bonds according to the above, is expected to occur on or around end of May or beginning of June 2021. The closing date and the relevant record date and payment date for repayment to the holders of the Bonds will be communicated separately through a press release and/or a notice to the holders of the Bonds and also be disclosed on the websites of ELG and the Agent. Subject to the approval of the restructuring through the written procedure, holders of Bonds do not have to take any action to receive repayment on the Bonds.

The restructuring can be summarised as follows.

  • The Investor will acquire 30% of shares in SIA ELG, a subsidiary of ELG AB, and certain receivables of ELG AB from ELG SIA for the total purchase price up to EUR 4,500,000. Initially a payment of EUR 2,500,000 will be made and final payment of up to EUR 2,000,000 after completion of the actions stipulated in the transaction agreements will be made for the part of the receivables towards SIA ELG under the Assignment Agreement. The Bank is entitled without acceptance and any extra documents to draw down EUR 2,000,000 (if received by SIA ELG within the Assignment Agreement) from the account of SIA ELG opened with the Bank and without acceptance and any extra documents to transfer these means for repayment of the Loan (as defined below).
  • The Bank will provide a loan to the Co-Borrowers of up to EUR 24,500,000 (the “Loan”). Subsequent and conditional to the repayment of EUR 2,000,000 mentioned above, the final loan amount will amount to EUR 22,500,000. The Loan will be secured by an extensive security package over the SIA ELG group’s assets (including real estates, assets, machinery, shares, trademarks, receivables etc).
  • The proceeds from the loan and the equity investment amount to in total EUR 27,000,000. EUR 21,000,000 will be used to repay the Bonds, EUR 2,000,000 will be used to refinance a bank loan of approximately EUR 4,350,000 issued to the ELG group’s German subsidiary, the remainder of the proceeds will be used for working capital needs and transaction costs.
  • In total EUR 26,000,000 will be put in escrow opened with the Bank following signing in favour of the holders of the Bonds and the other parties that shall be paid as part of closing of the restructuring after the fulfillment of all the conditions established by the relevant agreements.
  • The restructuring is governed mainly by the following agreements entered into today: a master transaction agreement between ELG, SIA ELG, Lauma Fabrics, Helike Holdings OÜ, Bryum Capital Ltd, the Bondholder Committee, the Bank and the Investor (the “MTA”) (the MTA supersedes the Standstill Letter), a loan agreement governing the Loan between SIA ELG, Lauma Fabrics and the Bank (the “Loan Agreement”), a share purchase agreement between ELG and the Investor, an assignment agreement between ELG, the Investor and SIA ELG, as the debtor, regarding certain receivables (the “Assignment Agreement”) and a shareholders’ agreement between ELG and the Investor. Furthermore, three escrow agreements have been entered into with respect to the funds put in escrow opened with the Bank: one escrow agreement with respect to EUR 21,500,000 between the Bank, the Investor, ELG, the Co-Borrowers and Intertrust (Sweden) AB as Agent (on behalf of the Bondholders) (the “Escrow Agreement”); a second escrow agreement with respect to EUR 2,000,000 between the Bank, the Group’s German subsidiary and the Co-Borrowers (to be used to refinance the bank loan of ELG group’s German subsidiary, payment of all remunerations and commissions to the Bank, refinancing the means already paid by ELG group company to refinance the mentioned loan); and a third escrow agreement with respect to EUR 2,500,000 between the Bank, the Investor, ELG and the Co-Borrowers (securing payment of the purchase price under the SIA ELG share purchase agreement).
  • The restructuring is under the MTA subject to certain conditions precedents: that the restructuring is approved by the holders of the Bonds through the written procedure; that certain intra-group transfers have been completed; and that no governmental authority enacts, issues, promulgates or enforces any law, non-appealable judgment, decree or injunction that is in effect immediately prior to closing and restrains or prohibits the restructuring or any of its steps.
  • Further, the restructuring is subject to additional conditions in the other restructuring agreements mentioned above, in particular the Loan Agreement and the Escrow Agreement, which are based on the Bank’s template loan and escrow agreement, contain conditions and circumstances which if not satisfied could also be ground for termination and/or entitle the Bank to refuse issuing the Loan or otherwise act in a way which inhibits the completion of the restructuring.

After a competitive bid process during the standstill period with several investors showing an interest in the ELG group and placing bids on ELG and/or the ELG group, it has been concluded by the Bondholder Committee and ELG that the best cash compensation offered is the offer received from the Bank and the Investor. Considering the structure of alternative offers and timing and prospects on potential return on any alternative non-cash compensation offered by other bidders, the offer received from the Bank and the Investor, is also for other reasons considered the strongest offer.

This information is information that European Lingerie Group AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out below, at 17:30 CET on 14 April 2021.

For more information, please contact:

Baiba Birzniece
Head of Strategy, M&A and IR
European Lingerie Group AB
+371 2839 1256
Baiba.birzniece@elg-corporate.com

*The Bondholder Committee consists of (i) Noble Fund Private Debt FIZAN, (ii) Cohanzick Management, LLC and CrossingBridge Advisors, LLC, (iii) “CBL Asset Management” Ieguldījumu Pārvaldes Akciju Sabiedrība acting as manager of the State Funded Pension Scheme pension investment plans “CBL Aktīvais Ieguldījumu Plāns” and “CBL Universālais Ieguldījumu Plāns” according to the State Funded Pensions Act (Valsts fondēto pensiju likums) of the Republic of Latvia, investment funds “CBL Global Emerging Markets Bond Fund” and “CBL Eastern European Bond Fund” according to the Investment Management Companies Act (Ieguldījumu pārvaldes sabiedrību likums) of the Republic of Latvia, and pension plans “CBL Aktīvais” and “CBL Sabalansētais” according to the Private Pension Funds Act (Privāto pensiju fondu likums) of the Republic of Latvia, (iv) Alfred Berg Kapitalförvaltning AS, (v) Signet Bank AS and (vi) Genève Invest (Europe) S.A.