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Cherokee Inc. (NASDAQ:CHKE) Explodes On Credit Facility Amendment

Cherokee Inc. (NASDAQ:CHKE)

Shares of Cherokee Inc. (NASDAQ:CHKE) gained 52.6% after the global brand marketing company announced the amendment, subject to satisfaction of certain conditions, of its senior secured credit facility. The amendment relieves the company from the burden of having to issue approximately $5.5 million in additional common stock.

Cherokee Inc. (NASDAQ:CHKE)

Credit Facility Amendment

The Chief Executive Officer, Henry Stupp, expects the agreement to allow the company to focus on growing the business for the long term. An agreement with lenders also marks an important step as Cherokee moves to stabilize its balance sheet and sustain liquidity.

“Over the last several months, we’ve taken several actions to focus on our core business fundamentals and high-growth brand opportunities. As a result, we are focused on reducing operating expenses and improving cash flow. We’re comfortable with our financial position and confident in our ability to meet our existing obligations,” said Mr. Stupp.

The amendment erases the need to exercise rights under a Common Purchase Agreement dated August 11, 2017. Cherokee Inc. (NASDAQ:CHKE) has since canceled a special meeting for shareholders that was to take place on November 28, 2017, to discuss the issuance of common stock.

The signing of the credit agreement appears to have strengthened investors’ confidence in Cherokee Inc. (NASDAQ:CHKE), be it in the short term. The stock has come under pressure in recent months having already dropped to this year’s lows. Cherokee is currently trading in a downtrend after losing more than 70% in market value since the start of the year.

It awaits to be seen if the stock will continue to trade higher given the credit facility amendment will provide greater financial flexibility, in addition, you to eliminate the obligation to call equity commitments.

Management Appointment

Separately, Cherokee Inc. (NASDAQ:CHKE) has confirmed the appointment of Mark Conway as the Chief Brand and Revenue Officer. Mr. Conway is to oversee the company’s business development, strategic brand planning, e-commerce and marketing. He joins the company with more than 20 years of retail experience.

“Mark joins us at a critical time in our growth trajectory as we harness ongoing transformations in the retail landscape and complete the integration of our acquisition of Hi-Tec. Going forward, Mark will play a key leadership role as we increase the penetration of our brand portfolio in multiple channels and synergize our business units,” said Mr. Stupp.

I have no positions in any of the stocks mentioned, and have no plans to initiate any positions within the next 72 hours. All information, including any data, is provided without any guarantees of accuracy.

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About the author: Steve Clark is a 23-year Wall St professional with stints in M&A, risk management, and algorithm trading. Steve keeps his head in the game by looking for, and writing about, small companies that often get overlooked by the big investment firms.

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Steve Clark is a 23-year Wall St professional with stints in M&A, risk management, and algorithm trading. Steve keeps his head in the game by looking for, and writing about, small companies that often get overlooked by the big investment firms.

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