Children's Place's stock soars 36% after retailer gets new $90 million loan from Saudi investor Mithaq Capital

By Ciara Linnane

Troubled retailer says loan will boost liquidity

The stock of the Children's Place Inc. soared 36% early Wednesday, after the troubled retailer said it has received another loan from Saudi investing firm Mithaq Capital, its majority shareholder, in the latest move to boost liquidity.

Mithaq is offering the company $90 million in an unsecured term loan that it will receive no later than April 19.

The loan "will further strengthen the company's liquidity position on better terms in the aggregate" than a previously agreed loan from 1903P Loan Agent LLC. Children's Place will no longer pursue that loan.

Children's Place (PLCE), parent to brands including Gymboree, Sugar & Jade and PJ Place, said in February that it had received notice from Mithaq and another Saudi investing firm, Snowball Compounding Ltd., that they had built a 54% stake in the company and were planning to nominate 11 people for election to the board at the 2024 annual shareholder meeting.

The news, which came just days after a profit warning, sent the stock up more than 92% to mark its biggest-ever one-day gain.

The warning reflected pressure on margins resulting from discounting to maximize sales, as well as higher shipping costs as customers buy fewer items spread over several shipments.

The company said at the time it was working with lenders to secure new financing.

Proceeds of the loan unveiled Wednesday will be used to repay and existing $50 million loan, to reduce account payable balances with vendors, and for other general corporate purposes, the company said in a statement.

The new loan matures in April of 2027 and will accrue interest at the rate of the SOFR (Secured Overnight Financing Rate) plus 4% a year.

Children's Place has now received a total of $168.6 million in funding from Mithaq since February.

Children's Place operates more than 500 stores in North America, and wholesale marketplaces and distribution in 16 countries via six international franchise partners.

The stock has fallen 69% in the year to date, while the S&P 500 SPXhas gained 6%

-Ciara Linnane

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04-17-24 0854ET

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