Barinboim regains control of Bagir

Zvika Barinboim, photo: Uriya Tadmor
Zvika Barinboim, photo: Uriya Tadmor


The suit manufacturer has raised $10 million, most of it from Zvika Barinboim,   to repay debt to banks 

Zvika Barinboim is regaining control of mens fashion company Bagir Group Ltd. (AIM: BAGR), which has undergone a severe crisis in the past few years, and is striving to put it back on track, sources inform "Globes".

Bagir was floated by Barinboim and FIMI Opportunity Funds on London's AIM and has lost most of its value since; the company has recently reported several significant efforts made under its old-new controlling shareholder, including a major financing round and a debt settlement with the lending banks.

In the first phase, Bagir carried out a share offering on the AIM, raising $10.5 million. Barinbaum himself was responsible for most of this sum, thereby boosting his dominance in Bagir. Three further UK entities also participated, the same ones that took part in the 2014 IPO, in a renewed show of trust in a company which has since lost most of its value.

This financing round helped Bagir cover its $21 million debt to Bank Leumi (TASE: LUMI) and Israel Discount Bank (TASE: DSCT), which were willing to sustain a two-digit "haircut", with a potential future "upside" involving receiving company shares. In its arrangement with the banks, Bagir paid most of the financing funds, more than $6 million, and also provided shares (about 10% of its share capital). The remainder of the debt, estimated at 50%, was written off. As a result, Bagir has been left with no banking debts whatsoever.

Bagir CEO Eran Ithzak expressed his satisfaction on the repayment of the company's banking debts and said that this move puts the company in a completely different business situation. He says that after repaying banking debts, "our main focus now is to surpass the expectations of our new clients and gain new clients, and we have been making very good progress on all fronts."

In this context, a few days ago Bagir reported the completion of its first international production order, manufactured in its new Ethiopian facility, and said that further orders are currently being produced. This order had been made by international fashion chain H&M and dispatched to H&M's US stores, as part of Bagir's decision to increase its operations there.

Earlier this year, Bagir decided to change its operating structure and focus on production in three facilities - in Vietnam, Egypt and Ethiopia. The company considers the Ethiopia plant an opportunity for long-term value generation, due to competitive production and low energy prices, as well as proximity to European markets and attractive, customs-free, export options to US and European markets. Bagir's 9,000 square meter factory building in Ethiopia is situated on a 50,000 square meter and has 450 employees.

The Marks & Spencer crisis

As mentioned above, Bagir held its IPO in April 2014 at a $66 million company valuation (after money), after completing a $33 million financing round. The company offered 60% of its shares to UK investors, shrinking FIMI's stake to 20% of share capital and Barinboim's to 15%.

Shortly after, Bagir had encountered a severe crisis, due to a slump in orders from the UK fashion chain Marks & Spencer. The company shifted to a negative equity, with liabilities to banks and controlling shareholders. The financing helps it attain a negative capital of almost $20 million.

However, only one month after the offering, Bagir published a severe profit and revenue warning, causing the share to drop 70% of its price in a matter of minutes to a $16 million market cap. In its announcement, the company said that "it encountered an unexpected drop in the volume of orders from its big client and a reduction in margins in orders already made by its biggest client (Marks & Spencer-A.L.)."

At present, Bagir is traded on AIM at a market cap of almost $12 million (£9.4 million), 80% lower than its IPO market value. In its results for the first half of 2016, Bagir's revenue dropped 26% to $33.5 million, still under the influence of the decision of the UK retail chain.

In the first half of 2016, Bagir's gross profit dropped 9% to $6 million, but the company managed to maintain its operating balance, after an operating loss of almost $2 million in the first half of 2015, reducing losses by 50% to $1.5 million.

Published by Globes [online], Israel business news - www.globes-online.com - on December 6, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

Zvika Barinboim, photo: Uriya Tadmor
Zvika Barinboim, photo: Uriya Tadmor
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