Non-Refundable Licensing Fee to be Used to Pay Down Debt
NEW YORK--(BUSINESS WIRE)--NexCen Brands, Inc. (PINK SHEETS: NEXC.PK) today announced that, through a new wholly owned subsidiary, TAF Australia, LLC, it has signed new long-term license agreements with RCG Corporation Ltd. and its subsidiary, The Athlete's Foot Australia Pty Ltd., previously the master franchisee for TAF in Australia and New Zealand. The Athlete's Foot Australia Pty Ltd. is Australia's largest specialty retailer of athletic footwear and currently operates 136 TAF franchised stores across Australia and New Zealand.
Under the terms of the new license agreements, which replace all prior franchise agreements among the parties, NexCen received a one-time, non-refundable licensing fee of $6.2 million in cash and, in turn, granted The Athlete's Foot Australia Pty Ltd. a royalty-free exclusive license to, and the right to sublicense, the TAF trademarks and trade dress in Australia and New Zealand to open and operate TAF stores in those countries for an initial term of 99 years. The license agreements are renewable for 50-year terms for nominal additional consideration.
In connection with the license agreements, NexCen entered into an amendment of its credit facility with BTMU Capital Corporation, which allows the Company to use up to $1.2 million of the licensing proceeds to invest in its manufacturing facility to expand production capabilities to produce other products beyond cookie dough. The amendment also requires the Company to use $5 million of the licensing proceeds to pay down a portion of its outstanding debt. This repayment will result in interest expense savings of $400,000 on an annualized basis.
Kenneth J. Hall, Chief Executive Officer of NexCen Brands, Inc., stated, "We are very pleased to sign these license agreements with RCG Corporation, which has been a strong steward of the TAF brand for many years. We are confident that, under the license agreements, RCG Corporation will continue to execute on our shared long-term vision for the TAF brand in Australia and New Zealand. We remain committed to the TAF brand and to its expansion globally though our franchise platform. This transaction, with the support of our lender, enables us to further pay down debt, reduce interest expense, and reinvest in our business with the goal of enhancing the Company's franchised brands, operations and profitability."
Ivan Hammerschlag, Chairman of RCG Corporation Ltd. commented, "These new license agreements with NexCen deliver long-term certainty to our business and are an exceptionally sound deployment of our capital. We look forward to further expanding the TAF brand in Australia and New Zealand as a licensee."
Chris Dull, President of NexCen Franchise Management, stated, "Our manufacturing facility has provided high-quality product to our Great American Cookies franchisees and generated profits for the business for over 30 years. Our investment in the facility, which includes our recent establishment of an R&D test kitchen as well as the current capital expenditures to expand its capabilities, demonstrates our commitment to the Great American Cookies brand and our efforts to further utilize the facility across our other QSR franchised brands."
NexCen Brands, Inc. is a strategic brand management company with a focus on franchising. It owns a portfolio of franchise brands that includes two retail franchise concepts: TAF™ and Shoebox New York®, as well as five quick service restaurant (QSR) franchise concepts: Great American Cookies®, MaggieMoo's®, Marble Slab Creamery®, Pretzelmaker® and Pretzel Time®. The brands are managed by NexCen Franchise Management, Inc., a subsidiary of NexCen Brands.
RCG Corporation Ltd. is a public investment holding company that owns The Athlete's Foot Australia Pty Ltd., Australia's largest specialty retailer of athletic footwear, which now operates 136 stores across Australia and New Zealand. RCG Corporation has a highly liquid balance sheet and is actively seeking synergistic acquisition opportunities that enable it to leverage its human and financial resources to maximum effect.
TAF, previously known as The Athlete's Foot®, was the world's first franchisor of athletic footwear stores. The concept, founded in 1971 in Pittsburgh, Pennsylvania, began domestic franchising in 1972 and opened its first international store in Adelaide, Australia in 1978. Today, TAF is recognized as a world leader in athletic footwear franchising operating in more than 30 countries. NexCen Brands acquired TAF in November of 2006 and launched a global re-branding effort in 2007. With a mission of meeting the needs of the everyday athlete, the 37 year-old brand is being reinvigorated with a modernized company logo, a new merchandising system, new in-store design, and an urban fashion boutique concept known as TAF UP™.
This press release contains "forward-looking statements," as such term is used in the Securities Exchange Act of 1934, as amended. Such forward-looking statements include those regarding expected cost savings, expectations for the future performance of our brands or expectations regarding the impact of recent developments on our business. When used herein, the words "anticipate," "believe," "estimate," "intend," "may," "will," "expect" and similar expressions as they relate to the Company or its management are intended to identify such forward-looking statements. Forward-looking statements are based on current expectations and assumptions, which are subject to risks and uncertainties. They are not guarantees of future performance or results. The Company's actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors that could cause or contribute to such differences include: (1) the Company's efforts to focus on the franchise business as its core business may not be successful and may not improve the performance of the Company; (2) economic conditions may deteriorate in international and domestic markets, which could negatively impact the Company's business and financial performance, (3) our planned capital expenditures may not increase the Company's revenues or profitability and (4) other factors discussed in our filings with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.