Claire's reaches accord with HSBC, salvaging turnaround plan

Claire's Stores, the Hoffman Estates-based retailer owned by Apollo Global Management, reached agreement with a key lender on its credit line, allowing the company's stalled turnaround plan to proceed.

HSBC Bank Plc agreed to revise Claire's European credit facility, according to a statement Tuesday from the tween jewelry chain. As a result, Claire's can make good on a $77 million interest payment to bondholders that it missed on Sept. 15, and get access to cash needed to run the business. The agreement also means Claire's can complete a stalled bond swap that will ease its interest burden.

Claire's has been saddled by debt it took on in Apollo's 2007 leveraged buyout. The exchange plan would reduce that pressure and give Chief Executive Officer Ron Marshall time to engineer a recovery. The chain has suffered as competition from online and specialty stores lured shoppers away, a trend that hastened the bankruptcy of retailers over the past year including Aeropostale Inc. and Pacific Sunwear of California Inc.

Representatives for Claire's didn't immediately respond to requests for comment. The amended credit package "requires a paydown to zero by Dec. 31, 2016 and no borrowings are permitted thereafter unless certain conditions are met, some of which are to be determined by HSBC," according to the filing.

The debt exchange, which covered almost $800 million of existing securities, wasn't fully subscribed, with holders of only $332.9 million signed up, Claire's said. At least $400 million was needed for the swap to become effective. As promised, affiliates of Apollo and Claire's Inc. made up some of the gap by contributing their holdings - $183.6 million from Apollo and $58.7 million from Claire's.

Total debt will be cut by about $396 million, debt maturities will be extended and interest savings will total about $24 million annually, Claire's said.