Debt deal secures Oroton funds extension

Troubled luxury handbag retailer Oroton has secured a six month extension of a $35 million finance package with Westpac in a deal that could result in a major shareholder controlling the company’s debt.

Oroton’s former director Will Vicars, a fund manager who holds an 18.2 per cent stake in the retailer, and Westpac have agreed on a put and call arrangement that extends the maturity date of the debt by six months to October, 2018.

The call option enables Vicars Entities to purchase all of the Westpac debt any time until one month after April 16, 2018, while the put would allow Westpac to transfer a $20 million working capital component of the facility to Vicars if there is a default.

The funds will be used in the lead up to Christmas and post-Christmas sales amid Oroton’s ongoing sales slump, with the retailer’s revenue down 11 per cent in the nine months to April 30.

In a trading update to the ASX on Tuesday, Oroton said the arrangements with Westpac and Vicars Entities will not stop it from pursuing other corporate or financing arrangements.

“Oroton Group has had commercial-in-confidence discussions with numerous substantial shareholders gauging their interest in providing a measure of credit support to Westpac in order to secure the continuation of the company’s facilities,” the company said in a statement.

The statement thanked Mr Vicars for his ongoing support, which included a $3 million line of credit to Oroton which expired, without being used, on July 31.

Vicars resigned from Oroton’s board in May, saying he wanted to reduce the number of his directorships.

Oroton has reaffirmed its previous guidance for underlying full-year earnings before interest, taxes, depreciation and amortisation of $2 million to $3 million.

However, it said the group’s net debt was forecast to be about $6 million, down from its previous guidance of $10 million, with the improvement largely due to the timing of tax payment refunds.av