main shareholder injects €30 million as group restructures debt

Is there a ray of hope for IKKS? The French premium fashion group, which first restructured its extensive debt at the beginning of 2023, has announced a new refinancing operation. According to information gleaned by FashionNetwork.com, the group’s shareholders have released fresh funds worth €30 million. Another step in the attempt to keep the IKKS group in business, following the announcement in February by CEO Ludovic Manzon of a new plan, called PhoenIKKS, to slash costs. The plan involves cutting 202 jobs in France (out of a total workforce of 1,328) and closing 77 of the 604 stores the group is operating in the country.

IKKS has been burdened with considerable debt for several years. The company was acquired in 2019 by its creditors, US investment funds Avenue Capital, Carval Investors and Marathon Asset Management. The new funds have been made available by the group’s main shareholder.

IKKS also stated that it had renegotiated its debt, without providing further details. According to documents filed at the trade court’s registry, the agreement concluded in recent weeks with IKKS’s creditors and partners involves a €30 million contribution as part of a share capital increase of the IKKS Invest company. Also, IKKS Invest will take over “all third-party credit claims corresponding to bond loans, by means of share capital increases by debt conversion.” The agreement also stipulates that “all sums owed as principal, and 50% of unpaid accrued interest on other loans,” will be waived, according to the document published last month.

If this information is correct, before the renegotiation IKKS was faced with a debt of €172 million that had to be repaid in the medium term, including bonds of over €100 million.

“This crucial refinancing operation is unique in the retail sector and enables us to relaunch our business on a healthy footing, and look to the future calmly,” said Manzon in a statement, on which he declined to comment further with FashionNetwork.com. “We are working closely with our main shareholder, who has shown renewed confidence in us, to implement the PhoenIKKS plan and resume growth,” he added.

IKKS’s financial restructuring is set to allow “the group to invest in growing its brands for the first time in 10 years,” the company said in a statement. The IKKS group, founded in 1987, also said it is working on its brand platform, on streamlining collections, and is attempting to improve its customers’ experience in an omni-channel environment.

€15 million in savings through redundancy plan

IKKS’s four-year plan is aimed at refocusing the group “on its more profitable ready-to-wear business, with a renewed concentration on the most relevant geographical areas.” A redundancy plan has been deployed as part of the recovery effort, aiming to generate savings of over €15 million at group level, according to the documents filed by IKKS.

The IKKS brand’s collections for men, women and children are characterised by an urban contemporary, slightly mischievous style. France is the brand’s main market, followed by Spain and Belgium. The group’s portfolio is completed by two much smaller sister brands: One Step is a womenswear retailer bought in 2015 from the Zannier group, while I.Code was created in-house in 2005 to target younger consumers. The future of the group outside France, and that of its other brands, is in question.

IKKS has not disclosed its overall revenue, but stated that in the last few years it has been adversely impacted by the pandemic, the invasion of Ukraine (where it used to have some factories) and rising inflation.

In 2023, the revenue of the IKKS Group alone (excluding its retail business, which in 2022 recorded sales worth €237 million at no profit) was €26.3 million, compared to the €26 million generated in 2022, according to the financial results filed with the trade court. Notably, impairment of financial assets worth €70 million was recorded in fiscal 2023. Net income (including heavy financial costs) showed a significant €75.5 million loss in 2023, compared to a loss of €8.7 million in 2022. Last year, operating profit was back in the black at over €6 million.

The question is whether the group will be able to balance the books again, through the PhoenIKKS plan, the debt restructuring operation, and the injection of fresh cash.