UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
April 13, 2017
 
J.Crew Group, Inc.
(Exact name of registrant as specified in its charter)
 
Commission File Number: 333-175075
 
Delaware	 	22-2894486	
(State or other jurisdiction
of incorporation)	 	(IRS Employer
Identification No.)	
770 Broadway
New York, NY 10003
(Address of principal executive offices, including zip code)
(212) 209-2500
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report.)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 	☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	

 	☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	

 	☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	

 	☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	

 

 

 
Item 7.01 Regulation FD Disclosure.
On April 11, 2017, J. Crew Operating Corp. (the “Company”) entered into confidentiality agreements (the “Confidentiality Agreements”) with certain holders (the “Ad Hoc PIK Noteholders”) of the 7.75%/8.50% Senior PIK Toggle Notes due May 1, 2019 (the “PIK Notes”) issued by Chinos Intermediate Holdings A, Inc. (the “Issuer”), an indirect parent holding company of the Company, regarding potential transactions to enhance its capital structure.  On April 13, 2017, the Company made a proposal to the Ad Hoc PIK Noteholders, which proposal is attached as Exhibit 99.1 (the “Company’s Proposal”).  On April 13, 2017, the Ad Hoc PIK Noteholders made a counterproposal to the Company, which is attached as Exhibit 99.2 (the “Ad Hoc PIK Noteholders’ Counterproposal,” and together with the Company’s Proposal, the “Confidential Information”).  The Confidentiality Agreements have expired and no agreement has been reached among the parties.  There are no further discussions scheduled at this time.
The Confidential Information was not prepared with a view toward public disclosure and should not be relied upon to make an investment decision with respect to the Company or the Issuer. The inclusion of the Confidential Information should not be regarded as an indication that the Company or its affiliates or representatives consider the Confidential Information to be a reliable prediction of future events, and the Confidential Information should not be relied upon as such. Neither the Company nor any of its affiliates or representatives has made or makes any representation to any person regarding the ultimate outcome of any potential restructuring transaction involving the PIK Notes, and none of them undertakes any obligation to publicly update the Confidential Information to reflect circumstances existing after the date when the Confidential Information was made or to reflect the occurrence of future events, even in the event that any or all of the assumptions underlying the Information are shown to be in error.
The information in this report under Item 7.01 shall not be deemed to be “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, and shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits:
Exhibit
No.	  	Description	
 	 	 	
99.1	  	Company’s Proposal, dated April 13, 2017	
99.2	  	Ad Hoc PIK Noteholders Counterproposal, dated April 13, 2017	

2

 
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
 
 	 	J.CREW GROUP, INC.	
 	 	 	 	
Date: April 14, 2017	 	By:	 	/s/ MICHAEL J. NICHOLSON	
 	 	 	 	Michael J. Nicholson	
 	 	 	 	President, Chief Operating Officer and
Chief Financial Officer	

3

COUNTERPROPOSAL TO PIK NOTEHOLDERS J.Crew 1 J.Crew Counterproposal to PIK Noteholders — Key Terms Summary of Consideration J.Crew Counterproposal (4/13) Consideration $250 million of IPCo Notes $150 million of preferred equity Min. Participation 95% of outstanding PIK Notes Summary Terms for Preferred Equity Issuer TBD Amount $150 million Security Type Non-convertible perpetual preferred equity Amount to Existing Equity Current preferred shareholders to convert existing preferred equity into (i) $150 million of pari passu non-convertible perpetual preferred equity with 7% PIK rate (other terms the same as those described herein) and (ii) 100% of common equity(1) Dividend Rate 5% cash / 2% PIK per annum, payable semi-annually Repurchase Right Company/Sponsors can repurchase full amount (incl. accrued/unpaid) at par at any time Shareholder Agreement Restrictions No dividends to common equity until preferred equity has been repaid in full Management Incentive Program [$15 - $20] million of pari passu non-convertible perpetual preferred equity with 7% PIK rate (other terms the same as those described herein) TBD % of common equity Governance None (1) Immediately prior to the exchange transaction, the Company would convert the existing preferred equity of Chinos Holdings, Inc. into 100% of the common equity of Chinos Holdings, Inc., and the current common equity of Chinos Holdings, Inc. and all options related thereto would be cancelled. Exhibit 99.1

J.Crew 2 J.Crew Counterproposal to PIK Noteholders — Key Terms (cont’d) Summary Terms for IPCo Notes J.Crew Counterproposal (4/13) Issuer J. Crew Brand, LLC; J. Crew Brand Corp. Guarantors J. Crew Domestic Brand, LLC (“IPCo”), J. Crew International Brand, LLC, J. Crew Brand Intermediate, LLC Maturity September 15, 2021 Principal $250 million Rate 10% cash / 2% PIK per annum, payable semi-annually Redemption No redemption prior to maturity Security Interest First lien on all IP Assets invested in IPCo First lien on all other assets of Issuers/Guarantors, incl. cash Pledge of 100% of the stock in IPCo/subsidiaries Covenants Permitted Debt: None, other than to refinance IPCo Notes Permitted Liens: None, other than usual and customary Permitted Investments: None, other than cash Sales/Sale-Leasebacks: None Restricted Payments: TBD Business: None other than ownership of IP Assets / licensing activities related thereto Subsidiaries: None Change of Control Put at par Change of control upon (i) Group ceasing to hold directly/indirectly 100% of equity interests in IPCo and (ii) J. Crew Brand, LLC ceasing to hold directly 100% of the equity interests in IPCo Events of Default If Group fails to make any semi-annual licensing payment under IP Licensing Agreement when due Other usual/customary events of default Other Other terms / conditions / implementation mechanics acceptable to Ad Hoc Group IP Licensing Agreement to be amended in a manner acceptable to Ad Hoc Group Notes registered upon issuance and publicly tradeable thereafter COUNTERPROPOSAL TO PIK NOTEHOLDERS

Project Oar PIK Noteholder ad hoc group counterproposal April 13, 2017 Exhibit 99.2

PIK Noteholder Ad Hoc Group Counterproposal (April 13, 2017) Minimum Participation 95% Participation Terms for IPCo Debt Issuer J.Crew Brand, LLC; J.Crew Brand Corp Guarantors J.Crew Domestic Brand, LLC (“IPCo”) ; J.Crew International Brand, LLC; J. Crew Brand Intermediate, LLC Maturity September 15, 2021 Interest Rate 13% cash, payable semi-annually Principal $250 million Redemption No redemption prior to maturity Covenants Permitted Debt: None, other than to refinance the IPCo Notes Permitted Liens: None, except for usual and customary Permitted Investments: None, other than cash Sales/Sale-Leasebacks: None Restricted Payments: None, other than IPCo can make restricted payments in cash to Group (i) for IPCo tax obligations and (ii) in an amount to be agreed Business: None, other than ownership of IP Assets / licensing activities related thereto Subsidiaries: None Change of Control Put at par Change of control upon (i) Group ceasing to hold directly/indirectly 100% of equity interests in IPCo and (ii) J. Crew Brand, LLC ceasing to hold directly 100% of the equity interests in IPCo(1) Security Interest First lien on all IP assets invested in IPCo First lien on all other assets of the Issuers and the Guarantors, including cash Pledge of 100% of the stock in IPCo and all of its subsidiaries Events of Default If Group fails to make any semi-annual licensing payment under IP Licensing Agreement when due Other usual and customary events of default Other Other terms and conditions and implementation mechanics acceptable to the Ad Hoc Committee IP Licensing Agreement to be amended in a manner acceptable to the Ad Hoc Committee Upon issuance and thereafter, Notes will be registered and publicly tradeable PIK Noteholder Ad Hoc Group Counterproposal Subject to confirmatory diligence.

PIK Noteholder Ad Hoc Group Counterproposal (April 13, 2017) Terms for Preferred Shares Issuer Chinos Intermediate Holdings B, Inc.(1) Amount to PIK Holders $200 million Amount to Existing Equity Current preferred shareholders to convert existing preferred equity into (i) $100 million of pari passu non-convertible perpetual preferred equity on same terms herein and (ii) 100% of common equity(2) Dividend Rate Preferred Equity to PIK Holders: 5% cash interest per annum, payable semi-annually, and 2% PIK interest per annum, payable semi-annually Preferred Equity to Existing Equity: 7% PIK interest per annum, payable semi-annually Conversion Option Non-convertible perpetual preferred equity Company / Sponsor Repurchase Right The Company / Sponsor can repurchase the full amount of preferred shares, plus accrued and unpaid PIK interest, at par (“Repurchase Right”) at any time Additional Terms of Preferred Prohibitions on: (i) structurally senior debt; (ii) liens; (iii) investments; (iv) restricted payments Management Incentive Program Management shall receive a MIP in the form of TBD preferred shares Governance Governance terms to be agreed upon PIK Noteholder Ad Hoc Group Counterproposal (Cont’d) Subject to confirmatory diligence. Immediately prior to the exchange transaction, the Company would convert the existing preferred equity of Chinos Holdings, Inc. into 100% of the common equity of Chinos Holdings, Inc., and the current common equity of Chinos Holdings, Inc. and all options related thereto would be cancelled.