Sycamore takes up larger stake in ailing Aeropostale

ANALYSIS_ Private capital firm Sycamore Partners is taking a larger stake in Aeropostale Inc. as the retailer reported another weak quarter - the fourth in a row - and gave a gloomy forecast. The teen apparel brand is in the process of overhauling its strategy. As unveiled Thursday, Aeropostale

has struck a deal in which Sycamore its affiliates so the latter will provide 150 million dollars in loans. The loan will consist of a five-year 100 million dollars term loan and a ten-year 50 million dollars term loan, the company said in a statement.

In

exchange, Sycamore Partners will receive convertible preferred stock that gives the firm the right to buy up to 5 percent of the company's stock.

As the teen apparel brand posted its fifth consecutive quarterly loss, it advanced that the first-quarter loss will be 70 cents to 75 cents a share, well wider than that advanced by analysts polled by Bloomberg, who pointed to an average estimate of a loss of 17 cents.

CEO of Aeropostale has been trying to turn around the retailer with updated fashions and by closing 52 underperforming stores this year, as reports broke that the retailer has lost money for five straight quarters.

Meanwhile, Crescendo Partners has been pressing Aeropostale management, sending a letter in November demanding that it find a buyer.

Aeropostale strikes deal with Sycamore to push turnaround

"We are moving aggressively and taking swift actions across all areas of our business that we expect will improve our operational and financial performance," Chief Executive Officer Tom Johnson said in a statement.

According to Johnson, the financing agreement "provides us with the flexibility to continue executing on our strategies designed to reposition the Aeropostale brand".

Since January, Aeropostale has been looking into its strategic options, including going private. The company reported another loss Thursday as it announced that it is giving Sycamore a larger role in shaping its future.

If Sycamore takes advantage of this, it would raise the firm's stake in the company to roughly 12.3 percent of its outstanding shares, making it the company's second-largest shareholder, according to FactSet.

Aeropostale also said that a managing director at Sycamore Partners will join its board, and the firm will receive the right to appoint another director. Its board will expand to 12 members from 11. The retailer also signed an apparel sourcing agreement with an affiliate of Sycamore.

Angela González Rodríguez