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Designing Strategy: Bill Blass Hires Bank to Explore a Sale

Fashion house Bill Blass has been approached by a would-be suitor and is exploring its options.

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with contributions from Marc Karimzadeh
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NEW YORK — Fashion house Bill Blass Ltd. has been approached by a would-be buyer and is said to be exploring its strategic options.

A financial source familiar with the negotiations confirmed the for-sale rumblings, but declined to provide the name of the suitor or a potential purchase price.

“There are rumors out there, but I can’t confirm or deny them,” Michael Groveman, chief executive officer of Blass, told WWD.

UCC Capital was retained last week by Blass as banker. Robert D’Loren, president and ceo of UCC, declined comment.

UCC Capital Corp. is the investment firm that structured the management-led takeover of Blass, which was accomplished through a bond offering tied to its trademarks. Groveman, who was part of the management-led takeover, is also on UCC’s advisory board.

Mergers and acquisition specialists who focus on the fashion industry noted that Haresh T. Tharani, chairman of the company’s largest licensee, The Resource Club Ltd., owns a 60 percent equity stake in Blass, while Groveman has the balance. One M&A specialist said “Tharani would like to cash out so he could then buy other things.” Another source said “Tharani also owns a sleepwear business, and is interested in expanding his sleepwear operation.”

Groveman and Tharani bought Blass from the designer in 1999 through a securitization that was the brainchild of D’Loren. At the time, Groveman was chief financial officer.

One factor that could affect the timing of the sale, and possibly its valuation, concerns ownership of the Blass trademarks.

In the 1999 securitization deal, Tharani and Groveman financed their purchase of Blass through the issuance of $25 million in asset-backed bonds. The bonds were secured by the Blass trademarks and licenses, which were put into an entity where there’s no risk of bankruptcy. The bonds, monetized by the royalty stream generated from the licenses, are self-liquidating and due to be paid off in 2009.

Whether the bonds are an issue would depend on how the deal was structured. An investment banker with a focus on the fashion industry, who requested anonymity, said he is familiar with deals where securitizations are not a problem as long as their structure includes a provision allowing for the bondholders of the secured debt to be paid off early.
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