Hanover Direct Announces Memorandum of Understanding with Chelsey Direct, LLC and Regan Partners, L.P. to Recapitalize the Compa
November 10 2003 - 8:47AM
PR Newswire (US)
Hanover Direct Announces Memorandum of Understanding with Chelsey
Direct, LLC and Regan Partners, L.P. to Recapitalize the Company,
Reconstitute the Board of Directors and Settle Outstanding
Litigation EDGEWATER, N.J., Nov. 10 /PRNewswire-FirstCall/ --
Hanover Direct, Inc. today announced that it had signed a
Memorandum of Understanding with Chelsey Direct, LLC and Regan
Partners, L.P. setting forth the agreement in principle to
recapitalize the Company, reconstitute the Board of Directors and
settle outstanding litigation between the Company and Chelsey. The
parties agreed to effect within ten days or as soon thereafter as
possible a binding Recapitalization Agreement that would, upon the
closing of the transactions set forth in the Recapitalization
Agreement, exchange 564,819 shares of a newly issued Series C
Preferred Stock and 81,857,833 shares of newly issued common stock
for the 1,622,111 shares of Series B Preferred Stock currently held
by Chelsey Direct, LLC, subject to adjustment if the transaction is
not consummated by December 17, 2003. If the closing takes place on
or before December 17, 2003, the Series C Preferred Stock will have
an aggregate liquidation preference of $56,481,900 while the
outstanding Series B Preferred Stock has a current aggregate
liquidation preference of $112,963,810 and a maximum final
liquidation preference of $146,168,422 on August 23, 2005. The new
common shares will have an effective issue price of $.69. With the
issuance of the new common shares, Chelsey Direct will have a
majority equity and voting interest in the Company. Upon the
execution of the Recapitalization Agreement, the Company will
reconstitute the Board to eight members, including four designees
of Chelsey Direct. The Recapitalization Agreement is subject to the
approval of the Transactions Committee and the Board of Directors
of Hanover. It is also subject to other consents including the
approval of Congress Financial Corporation. The Company intends to
prepare and file with the Securities and Exchange Commission and
transmit to all equity holders of the Company, as required by Rule
14f-1 of the Securities Exchange Act of 1934, as amended, a
statement regarding its intent to effect a change in majority of
directors as promptly as practicable. Following the expiration of
ten days following the filing and mailing of the statement, the
Board of Directors will increase to nine members, with the
additional director being a Chelsey Direct designee. The proposed
Series C Preferred Stock, with a liquidation preference of $100 per
share, carries a quarterly dividend, starting on January 1, 2006 at
6% and increasing each year by 11/2%. In lieu of cash dividends,
the Company may elect to accrue dividends at a rate equal to 1%
higher than the annual cash dividend rate. The Series C Preferred
Stock has a mandatory redemption date of January 1, 2009. The
Recapitalization Agreement will also define the duties of the
Transactions Committee and provide for the reconstitution of the
committees of the Board of Directors, mutual releases and
termination of litigation between the Company and Chelsey Direct,
LLC, voting agreements between Chelsey Direct, LLC and Regan
Partners, L.P., a major shareholder of the Company, registration
rights for the new common shares and agreements to recommend
certain amendments to the Company's Certificate of Incorporation,
including a 10-for-1 reverse stock split, at the first annual
meeting of shareholders following the closing. The Company has
filed the entire Memorandum of Understanding and related Exhibits
under cover of a Current Report on Form 8-K with the Securities and
Exchange Commission and strongly recommends that interested parties
refer to it for a full and complete understanding of the terms and
conditions of the Memorandum of Understanding. "On behalf of the
Board and the Company," stated Tom Shull, Hanover Direct's
Chairman, President and Chief Executive Officer, "I am pleased to
announce this agreement in principle with Chelsey Direct. We
believe we have reached a proposal that provides strong economic
benefits to the common shareholders of Hanover by eliminating the
overhang created by the Series B Preferred Stock, reducing the
potential maximum redemption requirement at the August 23, 2005
redemption date by approximately $90 million, and aligning the
interests of all parties to permit the continued turnaround of the
Company." "We're extremely pleased that the interests of all
shareholders have now been re-aligned so as to enable us to
maximize value," stated Stuart Feldman of Chelsey Direct. "We have
great hopes that, by working together, the Company can successfully
meet the challenges that lie ahead." "We believe this transaction
is in the interests of all shareholders," commented Basil Regan of
Regan Partners, L.P., a member of the Company's Board of Directors.
"We look forward to participating as a member of the Transactions
Committee and the Board in the continued efforts by the Company to
dispose of non-core assets, effect a timely redemption of the
Series C Preferred Stock and further the Company's strategic
business realignment program." About Hanover Direct, Inc. Hanover
Direct, Inc. (AMEX:HNV) and its business units provide quality,
branded merchandise through a portfolio of catalogs and e-commerce
platforms to consumers, as well as a comprehensive range of
Internet, e-commerce, and fulfillment services to businesses. The
Company's catalog and Internet portfolio of home fashions, apparel
and gift brands include Domestications, The Company Store, Company
Kids, Silhouettes, International Male, Scandia Down, and Gump's By
Mail. The Company owns Gump's, a retail store based in San
Francisco. Each brand can be accessed on the Internet individually
by name. Keystone Internet Services, LLC
(http://www.keystoneinternet.com/), the Company's third party
fulfillment operation, also provides the logistical, IT and
fulfillment needs of the Company's catalogs and web sites.
Information on Hanover Direct, including each of its subsidiaries,
can be accessed on the Internet at http://www.hanoverdirect.com/.
DATASOURCE: Hanover Direct, Inc. CONTACT: Charles E. Blue, Senior
Vice President of Hanover Direct, Inc., +1-201-272-3412; or Rich
Tauberman of The MWW Group for Hanover Direct, +1-201-507-9500 Web
site: http://www.hanoverdirect.com/
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