Aeropostale to raise capital from private equity firms via PIPE deal -sources

By VCPOST Staff Reporter

Feb 10, 2014 11:46 PM EST

New York-based teen apparel retailer Aeropostale Inc. is looking to raise capital from private equity firms as the struggling company mulls over options to prop up both its balance sheet and share price, sources told Reuters on Monday.

The report, citing sources, said that Aeropostale is under pressure from investors to sell itself. The teen apparel retailer has already tapped British investment bank Barclays PLC to advise on a possible sale. The option for an exit was surfaced by investors after Aeropostale posted losses for four consecutive quarters. 

Reuters sources said that should Aeropostale opt to raise capital, the teen apparel retailer may do it via a private investment in public equity (PIPE) transaction totaling a few hundred million dollars. 

According to the report, a PIPE transaction is an option available to small and mid-cap companies that may experience strain raising capital in public markets. Private equity firms involved in a PIPE deal could get stocks at a price lower than its current public market valuation. 

Sources said that Aeropostale is keeping an open mind and is studying various options, which may include an outright sale of the entire company, Reuters wrote. 

Aeropostale posted a net loss of $25.6 million or 33 cents per share for the quarter ended November 2. The teen apparel retailer's sales also plummeted 15% to $514.6 million, less than analysts' rough calculation of $520.2 million, the report said.

Aeropostale shareholder and activist investor Crescendo Partners LP in November prodded the teen apparel retailer's board to sell itself, Reuters said.

Meanwhile, New York-based private equity firm Sycamore Partners took an 8% stake in Aeropostale in September. The investment firm backed by retail veteran Stefan Kaluzny became the teen apparel retailer's third top shareholder after taking the stake, the report said.

Sycamore's intentions for its investment could not be learned. One of the sources hinted that the private equity firm may ultimately try to takeover Aeropostale or may just want to pressure the teen apparel retailer to mull over options, Reuters said. 

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