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  • Nick Monjo

Peekay: More Losses, Actively Seeks Buyer

Peekay Boutiques, the adult novelties and intimates retailer, lost $1.624 million on sales of $9.548 million during the three months ended September 30, considerably less than the $2.266 million it lost in the same period last year on slightly higher sales of $9.684 million.

The 47-store chain, which carries a huge debt burden and has lost money for years, also hired, in November a team of advisors to help it sell parts or all of its businesses, or fashion some other type of financial restructuring which could include a bankruptcy.

Peekay blames its long string of losses ($4,558 million in the first nine months of this year; $46.7 million in 2015; $4.2 million in 2014; and $2.6 million in 2013) on interest expense on the huge amount of debt accumulated in assembling the chain. As of the end of the third quarter, short term debt totaled $50.916 million and accrued interest and loan fees, $10.776 million.

Peekay reported that on November 11 it entered into an investment banking engagement agreement with SSG Advisors and Lake Street Capital Markets to advise it on the “sale of our business or some part(s)” of the company “and/or a restructuring of our balance sheet with existing stakeholders and lenders.” On the same date it also hired another firm, Traverse LLC, to also provide “certain restructuring consulting services” including “making available to the company a chief restructuring officer” as well as additional personnel to help in “its pursuit of restructuring alternatives.”

During much of 2015 Peekay had been involved in an effort to raise several millions in a public stock offering, and had previously hired Lake Street as its underwriter in the effort. But the company had, apparently abandoned the attempt at the start of 2016, and Lake Street had not been mentioned in filings until the re-engagement a short time ago.

The latest filing refers to possible previous purchase offers Peekay has received for its business, and details new fees and commissions to incentivise the advisors it has just hired.

Referring to its debt burden in the latest filing, Peekay noted “Approximately $38.2 million in senior secured debt matured on February 15, 2016, and the company does not have the resources necessary to pay this debt and has not been able to raise the capital necessary or source refinancing to satisfy this obligation and is operating under a forbearance agreement. The ability of the company to continue its operations and execute its business plan is dependent on its ability to refinance this debt and/or to raise sufficient capital to pay this debt and other obligations as they come due (or are extended through a refinancing) and to provide sufficient capital to operate its business as contemplated. The company continues to explore options to refinance or restructure the debt, to raise additional equity capital through a private or public placement of securities, or to complete a strategic transaction. These factors raise substantial doubt about the company’s ability to continue as a going concern.” — NM


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