Long-Term Debt | 9 Months Ended |
Nov. 02, 2013 |
Debt Disclosure [Abstract] | ' |
Long-Term Debt | ' |
Note 8. Long-Term Debt |
Long-term debt, net of applicable discounts or premiums, consisted of the following at November 2, 2013 and February 2, 2013 (both prior to the IPO and Restructuring Transactions): |
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| | November 2, | | | February 2, | | | | | | | | | | | | | |
2013 | 2013 | | | | | | | | | | | | |
Sun Promissory Notes | | $ | — | | | $ | 319,926 | | | | | | | | | | | | | |
Sun Capital Loan Agreement | | | — | | | | 71,508 | | | | | | | | | | | | | |
Cerberus Term Loan | | | 45,778 | | | | 45,431 | | | | | | | | | | | | | |
Term A Obligations | | | 18,569 | | | | 17,252 | | | | | | | | | | | | | |
Term B Obligations | | | 29,609 | | | | 27,507 | | | | | | | | | | | | | |
Term C Obligations | | | 19,316 | | | | 17,945 | | | | | | | | | | | | | |
Term D Obligations | | | 12,481 | | | | 11,595 | | | | | | | | | | | | | |
Term E Obligations | | | 6,115 | | | | 5,601 | | | | | | | | | | | | | |
Term F Obligations | | | 29,857 | | | | 27,344 | | | | | | | | | | | | | |
Term G Obligations | | | 5,205 | | | | — | | | | | | | | | | | | | |
12.875% 2009 Debentures due December 31, 2014 | | | 144,464 | | | | 139,378 | | | | | | | | | | | | | |
7.625% 1997 Debentures due October 15, 2017 | | | 79,459 | | | | 78,054 | | | | | | | | | | | | | |
3.5% 2004 Convertible Debentures due June 15, 2034 | | | 214 | | | | 211 | | | | | | | | | | | | | |
Less: Current portion of long-term debt | | | (166,929 | ) | | | — | | | | | | | | | | | | | |
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Total long-term debt | | $ | 224,138 | | | $ | 761,752 | | | | | | | | | | | | | |
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Sun Promissory Notes |
On May 2, 2008, VHC entered into a $225,000 Senior Subordinated Promissory Note and a $75,000 Senior Subordinated Promissory Note with Sun Kellwood Finance, LLC (“Sun Kellwood Finance”), an affiliate of Sun Capital Partners, Inc.. We collectively refer to these notes as our “Sun Promissory Notes”. The unpaid principal balance of the notes accrue interest at 15% per annum until the maturity date of October 15, 2011, at which point any unpaid principal balance of the notes shall accrue interest at a rate of 17% per annum until the notes are paid in full. All interest which is not paid in cash on or before the last day of each calendar month are deemed paid in kind and added to the principal balance of the notes unless an election is made otherwise. |
On July 19, 2012, Vince Holding Corp. amended the Sun Promissory Notes to extend the maturity date to October 15, 2016 and reduce the interest rate to 12% per annum until maturity, at which point any unpaid principal balance of the notes shall accrue interest at a rate of 14% per annum until the notes are paid in full. |
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On December 28, 2012, Sun Kellwood Finance, LLC (“Sun Capital Finance”) waived all interest capitalized and accrued under the notes prior to July 19, 2012. As both parties were under the common control of affiliates of Sun Capital Partners, Inc. (“Sun Capital”), this transaction resulted in a capital contribution of $270,852 which was recorded as an adjustment to additional paid in capital on our Condensed Consolidated Balance Sheet as of February 2, 2013. |
On June 18, 2013, Sun Kellwood Finance assigned all title and interest in the Sun Promissory Notes to Sun Cardinal, LLC (“Sun Cardinal”). Immediately following the assignment, Sun Cardinal contributed all outstanding principal and interest due under these notes as of June 18, 2013 to the capital of VHC. As both parties were under common control of affiliates of Sun Capital at such time, this transaction resulted in a capital contribution of $334,595, which was recorded as an adjustment to VHC’s additional paid in capital on the Condensed Consolidated Balance Sheet at November 2, 2013. |
Sun Capital Loan Agreement |
VHC was party to a Loan Authorization Agreement, originally dated February 13, 2008, by and between VHC (as the successor entity to Cardinal Integrated, LLC), SCSF Kellwood Finance, LLC (“SCSF Finance”) and Sun Kellwood Finance (as successors to Bank of Montreal) for a $72,000 line of credit, and $69,485 principal balance, which we refer to as the “Sun Capital Loan Agreement”. Under the terms of this agreement, as amended from time to time, interest accrued at a rate equal to the rate per annum announced by the Bank of Montreal, Chicago, Illinois, from time to time as its prime commercial rate, or equivalent, for U.S. dollar loans to borrowers located in the U.S. plus 2%. Interest on the loan was due by the last day of each fiscal quarter and is payable either in immediately available funds on each interest payment date or by adding such interest to the unpaid principal balance of the loan on each interest payment date. The original maturity date of the loan was August 6, 2009. On July 19, 2012, the maturity date of the loan was extended to August 6, 2014. |
On December 28, 2012, Sun Kellwood Finance and SCSF Finance waived all interest capitalized and accrued under the loan authorization agreement prior to July 19, 2012. As all parties were under the common control of affiliates of Sun Capital, this transaction resulted in a capital contribution of $18,249, which was recorded as an adjustment to additional paid in capital on our Condensed Consolidated Balance Sheet as of February 2, 2013. |
On June 18, 2013, Sun Kellwood Finance and SCSF Finance assigned all title and interest in the note under the Sun Capital Loan Agreement to Sun Cardinal. Immediately following the assignment, Sun Cardinal contributed all outstanding principal and interest due under this note as of June 18, 2013 to the capital of VHC. As all parties were under common control of affiliates of Sun Capital at such time, this transaction resulted in a capital contribution of $72,932, which was recorded as an adjustment to VHC’s additional paid in capital on the Condensed Consolidated Balance Sheet at November 2, 2013. |
Cerberus Term Loan Agreement |
On October 19, 2011, Kellwood Company and certain of its domestic subsidiaries, as borrowers (the “Cerberus Borrowers”), entered into a Term Loan Agreement (the “Term Loan Agreement”) with Cerberus Business Finance, LLC (the “Agent”), as agent and the lenders from time to time party thereto. The Term Loan Agreement provided the Borrowers with a non-amortizing secured Cerberus Term Loan in an aggregate amount of $55,000 (the “Cerberus Term Loan”). The Cerberus Term Loan terminated at the earliest to occur of (a) October 19, 2015, (b) the date on which the Wells Fargo Facility (as defined above in Note 7, Financing Arrangements, to the Consolidated Financial Statements) has been paid in full and all commitments thereunder have been terminated or (c) 60 days prior to the scheduled December 31, 2014, maturity date of our 12.875% Notes (including any extensions thereof agreed to after October 19, 2011). All borrowings under the Cerberus Term Loan bore interest, from the date of the agreement until the effective date of the amendment described below at a rate per annum equal to an applicable margin (10.25% per annum for LIBOR Rate Loans (as defined in the Term Loan Agreement) and 7.75% for Reference Rate Loans (as defined in the Term Loan Agreement)) plus, at the Cerberus Borrowers’ election, LIBOR or a Reference Rate as defined in the Term Loan Agreement. The Cerberus Term Loan was secured by a security interest in substantially all of the assets of the Borrowers, principally consisting of accounts receivable, inventory and intellectual property, which security interest was contractually subordinated to security interests of the lenders under the Credit Agreement. The Term Loan Agreement contained certain customary representations, warranties, provisions and restrictions. The Term Loan Agreement required that the Borrowers maintain a fixed charge coverage ratio as of each fiscal quarter end prior to the effective date of the amendment described below of at least 1:1. The fixed charge ratio was defined as the ratio of Consolidated EBITDA (as defined in the December 31 amendment to the Term Loan Agreement as described below ) (with certain addbacks as defined in the amended Term Loan Agreement for certain restructuring charges, startup losses in newly developed brands, costs incurred in certain acquisitions, as well as certain other costs and charges) minus capital expenditures and certain distributions and management fees; to fixed charges, defined as consolidated net interest expense paid or payable in cash, scheduled principal payments on debt in cash and certain earnout payments paid in cash, excluding earnout payments related to the Vince brand for the 2011 fiscal year, up to a certain amount, calculated over the trailing four fiscal quarters. The Term Loan Agreement also required that the Cerberus Borrowers maintained a leverage ratio as defined in the Term Loan Agreement and ranging from 2.85:1-4.25:1 during the life of the Cerberus Term Loan prior to the effective date of the amendment described below. The leverage ratio was defined as the ratio of indebtedness secured by a lien on any collateral (including the debt under the Credit Agreement and Cerberus Term Loan, but excluding the debt under the Sun Term Loan Agreements (as defined below) and the 12.875% Notes), divided by Consolidated EBITDA (as defined in the December 31 amendment to the Cerberus Term Loan described below) for the trailing four fiscal quarters. |
On January 26, 2012, Kellwood Company obtained a waiver to the Cerberus Term Loan until the end of the first quarter of fiscal 2012 (the “Waiver Period”), as it anticipated not being in compliance with the fixed charge coverage ratio and the leverage ratio covenants as of January 28, 2012. In conjunction with this waiver, Kellwood Company paid the Agent a $75 waiver fee and an affiliate of Sun Capital provided the Agent with a $10,000 letter of credit. The waiver required the parties to the Cerberus Term Loan to work in good faith during the Waiver Period to amend the financial covenants set forth in the Cerberus Term Loan at levels mutually acceptable to all parties. |
On April 20, 2012 Kellwood Company entered into Consent and Amendment No. 1 to the Cerberus Term Loan. This amendment provided for the consent of the Cerberus Term Loan lenders to the additional term loans under the Sun Term Loan Agreement (as defined below), the release of the $10,000 letter of credit noted above and the delivery of audited fiscal 2011 financial statements within 97 days of fiscal year-end. This amendment increased the applicable margins for borrowings under the Cerberus Term Loan which bore interest from and after the effective date of the amendment at a rate per annum equal to an applicable margin (ranging from 10.75%-11.25% per annum for LIBOR Rate Loans (as defined in the Cerberus Term Loan) and 8.25%-8.75% for Reference Rate Loans (as defined in the Cerberus Term Loan) based on leverage and income tests under the Cerberus Term Loan) plus, at the Cerberus Borrowers’ election, LIBOR or a Reference Rate as defined in the Cerberus Term Loan. The amendment also provided for a portion of such interest equal to 1% per annum to be paid-in-kind and added to the principal amount of such term loans. The amendment also modified the financial covenant levels required to be maintained by the Cerberus Borrowers beginning with the second quarter of fiscal 2012 for each financial covenant. The Cerberus Term Loan, as amended, required that the Borrowers maintain a fixed charge coverage ratio as of each fiscal quarter end (beginning with the second quarter of fiscal 2012) ranging from 0.14:1-1.28:1 during the life of the Cerberus Term Loan. The Cerberus Term Loan, as amended, also required that the Cerberus Borrowers maintain a leverage ratio as defined in the Cerberus Term Loan and ranging from 2.44:1-7.77:1 during the life of the Cerberus Term Loan (beginning with the second quarter of fiscal 2012). The minimum fixed charge coverage ratios for the second, third and fourth quarters of fiscal 2012 were 0.14:1, 0.41:1 and 0.67:1, respectively. The minimum fixed charge coverage ratios for fiscal 2013 were 0.89:1, 1.24:1, 1.28:1, and 1.22:1 for the first through fourth quarters, respectively. The maximum leverage ratios for fiscal 2013 were 3.47:1, 358:1, 3.08:1, and 2.44:1 for the first through fourth quarters, respectively. At November 2, 2013 Kellwood Company was in compliance with all provisions of the amended Cerberus Term Loan. |
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On December 31, 2012, Kellwood Company amended the Cerberus Term Loan to obtain consent to the sale of the Royal Robbins business, to release Royal Robbins, LLC as a Borrower and/or Obligor under the Cerberus Term Loan, and to release the agent’s lien on the assets of Royal Robbins. This amendment required the prepayment of the obligations under the Cerberus Term Loan in an amount not less than $10,000 from a portion of the proceeds from the sale of Royal Robbins with the remaining funds to be remitted to the Wells Fargo Facility. This amendment also redefined the definition Consolidated EBITDA to allow for certain additional addbacks. |
On May 3, 2013, Kellwood Company amended the Cerberus Term Loan in anticipation of not being in compliance with the fixed charge coverage ratio covenant during the 2013 fiscal year. This amendment modified the definition of the fixed charge coverage ratio to allow us to exclude certain types of capital expenditures in the calculation of the minimum fixed charge coverage ratio for the second, third, and fourth quarters of fiscal 2013, not to exceed $7,500 in total. Additionally, this amendment modified the minimum fixed charge coverage ratios for the second, third, and fourth quarters of fiscal 2013 to be 1.10:1, 1.175:1, and 1.25:1, respectively. On June 28, 2013, Cerberus and Kellwood Company entered into a consent to the Cerberus Term Loan with respect to Vince Holding Corp.’s incurrence of the Term G Loan under the Sun Term Loan B/C/D/E/F/G Agreement. |
On November 27, 2013, in connection with the closing of the IPO and Restructuring Transactions, the Cerberus Term Loan was repaid with a portion of the proceeds from the repayment of the Kellwood Note Receivable. |
Term A/B/C/D/E/F/G Obligations |
On October 19, 2011, Kellwood Company and certain of its domestic subsidiaries, as borrowers (the “Sun Term Loan Borrowers”), affiliates of Sun Capital, as lenders, and Sun Kellwood Finance, as collateral agent, entered into (a) the Amended and Restated Term A Loan Agreement (the “Term A Loan Agreement”) and (b) the Third Amended and Restated Term Loan (the “Term B/C/D Loan Agreement”, and together with the Term A Loan Agreement, the “Sun Term Loan Agreements”). |
The Term A Loan Agreement served to amend and restate in its entirety the Term Loan dated July 23, 2009, as previously amended (the “Prior Term A Agreement”) pursuant to which the lenders made certain Term A loans with an original principal amount of $12,168, the proceeds of which were used by the Sun Term Loan Borrowers to fund payment of the principal amounts outstanding, plus accrued and unpaid interest on the 7.875% 1999 Debentures due July 15, 2009 that were not tendered as part of the exchange offer for the 12.875% Notes. |
The Term B/C/D Loan Agreement served to amend and restate in its entirety the Second Amended and Restated Term Loan dated as of August 5, 2011 (as amended, amended and restated, supplemented or otherwise modified from time to time prior to the date hereof, the “Prior Term B/C/D Agreement”) pursuant to which the lenders made certain (i) Term B loans with an original principal amount of $22,393 issued on January 4, 2011, the proceeds of which were used by the Sun Term Loan Borrowers solely to finance the acquisition of Rebecca Taylor, (ii) Term C loans with an original principal amount of $14,900 issued on March 18, 2011, the proceeds of which were used to fund working capital, capital expenditures and other general corporate purposes of the Sun Term Loan Borrowers and (iii) Term D loans with an original principal amount of $10,000 issued on August 5, 2011, the proceeds of which were used to fund all or any part of the purchase price or cost of design, construction, installation or improvement or lease of property (real or personal), plant or equipment (whether through the direct acquisition of such assets or the acquisition of capital stock of any person owning such assets) used in the business of the Sun Term Loan Borrowers. |
The primary reason for entering into the Sun Term Loan Agreements was to conform the major non-economic terms of such agreements, including the representations, warranties and covenants, to those of the Credit Agreement and the Cerberus Term Loan. The Sun Term Loan Agreements were also amended to provide a termination date of the earlier of (i) January 19, 2017 or (ii) the date on which the Cerberus Term Loan has been terminated; provided that, if the Cerberus Term Loan was extended, the stated maturity date set forth in (i) above shall be extended by a period of the same duration. The Sun Term Loan Agreements were amended such that the Sun Term Loan Agreements bear interest at 10% per annum (or 12% per annum in the case of the Term E loans, the Term F loans and the Term G loans described below) that will be added to the principal amounts of the Sun Term Loans. If the availability under the Credit Agreement is not less than $45,000, Kellwood Company was permitted to pay interest at a rate of 5% per annum in cash with respect to the Term A, B, C and D Loans and at a rate of 6% per annum in cash with respect to the Term E, F, and G Loans. The Sun Term Loan Agreements were secured by a security interest in substantially all of the assets of the Sun Term Loan Borrowers, which security interest was contractually subordinated to the security interests of the lenders under the Credit Agreement and the Cerberus Term Loan. The Sun Term Loan Agreements contained certain customary representations, warranties, provisions and restrictions substantially similar to the Credit Agreement and Cerberus Term Loan. |
On April 20, 2012, Kellwood Company entered into an amendment and restatement of each of the Sun Term Loan Agreements. The Term B/C/D Loan Agreement was amended and restated in order to (i) provide for new Term E loans with an original principal amount of $5,100, the proceeds of which were used to finance costs and expenses and earnout payments in respect of certain acquisitions consummated by the Borrowers prior to the date of the Term E loans, (ii) provide for new Term F loans with an original principal amount of $24,900, the proceeds of which were used to fund working capital, capital expenditures and other general corporate purposes of the Sun Term Loan Borrowers, and (iii) to conform to the changes made to the Credit Agreement and the Cerberus Term Loan. The primary reason for entering into the amendment and restatement of the Term A Loan Agreement was to conform to the changes made to the Credit Agreement, the Cerberus Term Loan and the Term B/C/D Loan Agreement. On June 28, 2013, Kellwood Company entered into an amendment and restatement of the Sun Term Loan B/C/D/E/F Agreement in order to (i) provide for new Term G loans with an original principal amount of $5,000, the proceeds of which were used to fund working capital, capital expenditures and other general corporate purposes of the Sun Term Loan Borrowers and (ii) to conform to the changes made to the Credit Agreement and the Cerberus Term Loan. The Term E loans, the Term F loans and the Term G loans bore interest at 12% per annum that was added to the principal amounts of such loans. If the availability under the Credit Agreement was not less than $45,000, Kellwood Company was permitted to pay interest at a rate of 6% per annum in cash. No cash interest has been paid on the Sun Term Loan Agreements. |
On November 27, 2013, in connection with the closing of the IPO and Restructuring Transactions, the Sun Term Loan Agreements were discharged through (i) the application of a portion of the Kellwood Note Receivable proceeds and (ii) capital contributions by Sun Capital affiliates. |
12.875% Notes |
Interest on the 12.875% 2009 Debentures due December 31, 2014 of Kellwood Company (the “12.875% Notes”) was paid (a) in cash at a rate of 7.875% per annum payable in January and July; and (b) in the form of PIK interest at a rate of 5% per annum (“PIK Interest”) payable either by increasing the principal amount of the outstanding 12.875% Notes, or by issuing additional 12.875% Notes with a principal amount equal to the PIK Interest accrued for the interest period. The 12.875% Notes were guaranteed by various of Kellwood Company’s subsidiaries on a secured basis, which security interest was contractually subordinated to security interests of lenders under the Credit Agreement, the Cerberus Term Loan and the Sun Term Loan Agreements. The 12.875% Notes contained certain customary provisions that, among other things, limited the ability to incur additional indebtedness, make certain restricted payments, dispose of assets or redeem or repurchase capital stock or prepay subordinated indebtedness. |
On November 27, 2013, in connection with the closing of the IPO and Restructuring Transactions, the 12.875% Notes were redeemed with a portion of the proceeds from the repayment of the Kellwood Note Receivable, at which time Vince, LLC was released as a guarantor of such indebtedness and the obligations under the related indenture were satisfied and discharged. |
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7.625% Notes |
Interest on the 7.625% 1997 Debentures due October 15, 2017 of Kellwood Company (the “7.625% Notes”) is payable in April and October. |
On November 27, 2013, in connection with the closing of the IPO and Restructuring Transactions, Kellwood Company commenced a tender offer for the 7.625% Notes. A portion of the proceeds from the repayment of the Kellwood Note Receivable were used to fund the tender offer, as discussed below. |
Principal amounts of the notes payable and long-term debt outstanding at November 2, 2013 include the following: |
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| | Outstanding | | | Capitalized | | | Total | | | Less: | | | Amount per | |
Principal | PIK Interest | Discount | Consolidated |
| | | Balance |
| | | Sheet |
Cerberus Term Loan | | $ | 45,000 | | | $ | 778 | | | $ | 45,778 | | | $ | — | | | $ | 45,778 | |
Term A Obligations | | | 12,168 | | | | 6,401 | | | | 18,569 | | | | — | | | | 18,569 | |
Term B Obligations | | | 22,393 | | | | 7,216 | | | | 29,609 | | | | — | | | | 29,609 | |
Term C Obligations | | | 14,900 | | | | 4,416 | | | | 19,316 | | | | — | | | | 19,316 | |
Term D Obligations | | | 10,000 | | | | 2,481 | | | | 12,481 | | | | — | | | | 12,481 | |
Term E Obligations | | | 5,100 | | | | 1,015 | | | | 6,115 | | | | — | | | | 6,115 | |
Term F Obligations | | | 24,900 | | | | 4,957 | | | | 29,857 | | | | — | | | | 29,857 | |
Term G Obligations | | | 5,000 | | | | 205 | | | | 5,205 | | | | — | | | | 5,205 | |
12.875% Notes | | | 120,590 | | | | 26,178 | | | | 146,768 | | | | (2,304 | ) | | | 144,464 | |
7.625% Notes | | | 86,953 | | | | — | | | | 86,953 | | | | (7,494 | ) | | | 79,459 | |
83.5% 2004 Convertible Debentures due June 15, 2034 | | | 200 | | | | 14 | | | | 214 | | | | | | | | 214 | |
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Subtotal | | $ | 347,204 | | | $ | 53,661 | | | $ | 400,865 | | | $ | (9,798 | ) | | | 391,067 | |
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Less: Current portion of long-term debt | | | | | | | | | | | | | | | | | | | (166,929 | ) |
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Total long-term debt outstanding | | | | | | | | | | | | | | | | | | $ | 224,138 | |
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Principal amounts of the notes payable and long-term debt outstanding at February 2, 2013 include the following: |
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| | Outstanding | | | Capitalized | | | Total | | | Less: | | | Amount per | |
Principal | PIK Interest | Discount | Consolidated |
| | | Balance |
| | | Sheet |
Sun Promissory Notes | | $ | 300,000 | | | $ | 19,926 | | | $ | 319,926 | | | $ | — | | | $ | 319,926 | |
Sun Capital Loan Agreement | | | 69,485 | | | | 2,023 | | | | 71,508 | | | | — | | | | 71,508 | |
Cerberus Term Loan | | | 45,000 | | | | 431 | | | | 45,431 | | | | — | | | | 45,431 | |
Term A Obligations | | | 12,168 | | | | 5,084 | | | | 17,252 | | | | — | | | | 17,252 | |
Term B Obligations | | | 22,393 | | | | 5,114 | | | | 27,507 | | | | — | | | | 27,507 | |
Term C Obligations | | | 14,900 | | | | 3,045 | | | | 17,945 | | | | — | | | | 17,945 | |
Term D Obligations | | | 10,000 | | | | 1,595 | | | | 11,595 | | | | — | | | | 11,595 | |
Term E Obligations | | | 5,100 | | | | 501 | | | | 5,601 | | | | — | | | | 5,601 | |
Term F Obligations | | | 24,900 | | | | 2,444 | | | | 27,344 | | | | — | | | | 27,344 | |
12.875% Notes | | | 120,590 | | | | 22,598 | | | | 143,188 | | | | (3,810 | ) | | | 139,378 | |
7.625% Notes | | | 86,953 | | | | — | | | | 86,953 | | | | (8,899 | ) | | | 78,054 | |
3.5% 2004 Convertible Debentures due June 15, 2034 | | | 200 | | | | 11 | | | | 211 | | | | — | | | | 211 | |
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Total long-term debt outstanding | | $ | 711,689 | | | $ | 62,772 | | | $ | 774,461 | | | $ | (12,709 | ) | | $ | 761,752 | |
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As discussed above and in connection with the IPO and the Restructuring Transactions, Kellwood Company, LLC refinanced, repaid or discharged or repurchased all indebtedness outstanding under the Cerberus Term Loan, the Sun Term Loan Agreements and the 12.875% Notes. Kellwood Company, LLC also amended and restated the Wells Fargo Facility on November 27, 2013 in order to, among other things, remove Vince, LLC as a guarantor of the related obligations. Additionally, Kellwood Company, LLC has completed a tender offer for all of the issued and outstanding 7.625% Notes. After giving effect to the final settlement of the tender offer on December 12, 2013, approximately $48.8 million in aggregate principal amount of the 7.625% Notes remain outstanding. Neither VHC, nor Vince Intermediate nor Vince, LLC are a guarantor or obligor of the 7.625% Notes. |