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): June 9, 2006
TARRANT APPAREL GROUP
(Exact Name of Registrant as Specified in Charter)
CALIFORNIA 0-26006 95-4181026
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
3151 EAST WASHINGTON BOULEVARD
LOS ANGELES, CALIFORNIA 90023
(Address of Principal Executive Offices) (Zip Code)
(323) 780-8250
(Registrant's Telephone Number, Including Area Code)
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 (see General Instruction A.2. below):
[_] 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 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION
UNDER AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
NEW CREDIT FACILITY WITH DBS BANK HONG KONG LIMITED
Tarrant Apparel Group's subsidiaries in Hong Kong, Tarrant Company
Limited, Marble Limited and Trade Link Holdings Limited (each, a "HK Subsidiary"
and collectively, the "HK Subsidiaries"), have entered into a new credit
facility with DBS Bank Hong Kong Limited ("DBS"), which facility became
effective June 9, 2006. Under this facility, we may arrange for letters of
credit and acceptances. The maximum amount the HK Subsidiaries may borrow under
this facility at any time is U.S. $25 million. The interest rate under the
letter of credit facility is equal to the Standard Bills Rate quoted by DBS
minus 0.5% if paid in Hong Kong Dollars or the Standard Bills Rate quoted by DBS
plus 0.5% if paid in any other currency. This is a demand facility and is
secured by a security interest in all the assets of the HK Subsidiaries, a
guarantee by Tarrant Apparel Group, and by a pledge of the real property where
our Hong Kong office is located (which property is owned by Gerard Guez, our
Chairman and Interim Chief Executive Officer, and Todd Kay, our Vice Chairman).
In addition to the $25 million facility, the HK subsidiaries received tax loans
in the amount of approximately HKD 3.7 million (equivalent to U.S. $478,000),
which are payable over a seven month period and bear interest at the rate equal
to the Hong Kong prime rate plus 1% and are subject to the same security. The
facility includes customary default provisions. In addition, we are subject to
certain restrictive covenants, including that we maintain a specified tangible
net worth, interest coverage ratio, and leverage ratio at December 31, 2006 and
achieve a minimum earnings before interest, taxes, depreciation and amortization
for the fiscal year ending December 31, 2006.
ITEM 1.02 TERMINATION OF A MATERIAL DEFINITIVE AGREEMENT.
TERMINATION OF CREDIT FACILITY AND TERM LOAN WITH UPS CAPITAL
On June 9, 2006, we completed the pay-off of all remaining amounts due
under both the letter of credit facility and term loan agreement between the HK
Subsidiaries and UPS Capital Global Trade Finance Corporation ("UPSC"). The
principal balance and accrued interest under the letter of credit facility was
approximately $7.0 million and the remaining principal balance and accrued
interest under the term loan was approximately $1.5 million. As a result of the
payment of these obligations, the UPSC letter of credit facility and term loan
agreement were terminated and all collateral released. There were no prepayment
penalties under these arrangements.
The HK Subsidiaries originally entered into the letter of credit
facility with UPSC in June 2002. Under this facility, we could arrange for the
issuance of letters of credit and acceptances. The facility was collateralized
by the shares and debentures of all of the HK Subsidiaries. In addition to the
guarantees provided by Tarrant Apparel Group and our subsidiaries, Fashion
Resource (TCL) Inc. and Tarrant Luxembourg Sarl, Gerard Guez, our Chairman and
Interim Chief Executive Officer, also signed a guarantee of $5 million in favor
of UPSC to secure this facility. This facility bore interest at 10.75% per annum
at March 31, 2006.
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The HK Subsidiaries originally entered into the term loan agreement
with UPSC in December 2004, pursuant to which UPSC made a $5 million term loan,
the proceeds of which were used to repay $5 million of indebtedness owed to UPSC
under the letter of credit of facility. The principal amount of this loan was
due and payable in 24 equal monthly installments of approximately $208,333 each,
plus interest equivalent to the "prime rate" plus 2% commencing on February 1,
2005. The obligations under the loan agreement were collateralized by the same
security interests and guarantees provided under our letter of credit facility
with UPSC. Additionally, the term loan is secured by two promissory notes
payable to Tarrant Luxembourg Sarl in the amounts of $2,550,000 and $1,360,000
and a pledge by Gerard Guez, our Chairman and Interim Chief Executive Officer,
of 4.6 million shares of our common stock.
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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.
TARRANT APPAREL GROUP
Date: June 14, 2006 By: /S/ CORAZON REYES
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Corazon Reyes, Chief Financial Officer
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