Children's Place shares soar 11% as company receives second tranche of loan aimed at boosting liquidity

By Ciara Linnane

Troubled retailer gets $48.6 million loan on top of $30 million received in February

Children's Place Inc.'s stock soared 11% Monday after the troubled retailer said it has received the second tranche of a loan from Saudi investing firm Mithaq Capital aimed at boosting liquidity.

The company (PLCE) said it has received $48.6 million of an interest-free, unsecured and subordinated term loan from Mithaq, after receiving $30 million in February.

The funding came on Friday, at which point the resignations of five directors - Norman Matthews, John E. Bachman, John A. Frascotti, Debby Reiner and Michael Shaffer - became effective, reducing the size of the board to six people.

The company named former Wells Fargo & Co. (WFC) official Douglas Edwards as independent director with immediate effect.

The company is still expecting to be able to close a previously announced $130 million term loan this month and is pursuing improved terms with lender Gordon Brothers as well as alternative financing on terms no less favorable.

Children's Place, parent to brands including Gymboree, Sugar & Jade and PJ Place, said in February that it had received notice from Mithaq and another Saudi investing firm, Snowball Compounding Ltd., that they had built a 54% stake in the company and were planning to nominate 11 people for election to the board at the 2024 annual shareholder meeting.

The news sent the stock up more than 92% to mark its biggest-ever one-day gain - just days after a profit warning for the fourth quarter that sent the stock to a 21-year low.

The loss reflected pressure on margins resulting from discounting to maximize sales, as well as higher shipping costs as customers buy fewer items spread over several shipments.

The company said at the time it was working with lenders to secure new financing.

"We believe that there is a strong alignment of interests between the Board and all shareholders that will help put the company on a path to strong future free cash flow generation," said Turki Saleh A. AlRajhi, chair and CEO of Mithaq, in a statement.

Children's Place operates more than 500 stores in North America, and wholesale marketplaces and distribution in 16 countries via six international franchise partners.

The stock has fallen 58% in the last 12 months, while the S&P 500 SPX has gained 32%.

-Ciara Linnane

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

03-11-24 1056ET

Copyright (c) 2024 Dow Jones & Company, Inc.