Did The Coldwater Creek Turnaround Really Get Saved?

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Coldwater Creek Inc. (NASDAQ: CWTR) is nothing short of a highly unusual winner today.  The news is that the women’s apparel retailer announced the closing of a five-year, $65 million senior secured term loan provided by Golden Gate Capital. The troubled retailer also announced the completion of an amendment to its $70 million revolving credit facility with Wells Fargo Capital Finance, part of Wells Fargo & Company (NYSE: WFC), which matures on May 16, 2016.

Golden Gate’s senior secured term loan is collateralized by a second lien on Coldwater Creek’s inventory and receivables and a first lien on the Company’s remaining assets. On top of interest and fees payable on the loan, Coldwater Creek issued convertible preferred stock to an affiliate of Golden Gate that gives it the right to purchase up to 19.9% of the company’s common stock at an exercise price of $0.85 per share.

Golden Gate also received the right to appoint two members to Coldwater Creek’s Board of Directors. This private equity investment firm is active in the retail and restaurants sector with its portfolio including Eddie Bauer, J.Jill, Zale Corporation (NYSE: ZLC) and Express Inc. (NYSE: EXPR). Over the last year it has also announced investments in California Pizza Kitchen, Pacific Sunwear (NASDAQ: PSUN), and Payless ShoeSource.

Normally we would not even care about such a small company, but Coldwater Creek is an activist situation and turnaround situation now entangled in private equity.  Shares are up a whopping 50% at $0.785 on more than 3 million shares after less than one hour of trading versus an average daily volume of less than 800,000 shares.  This stock’s 52-week range is $0.45 to $1.83 but this stock used to trade over $10.00.

JON C. OGG

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