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): December 31, 2004
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.
On December 31, 2004, we amended our letter of credit facility with UPS
Capital Global Trade Finance Corporation, or UPSC, and entered into a new term
loan facility with UPSC.
AMENDMENT TO LETTER OF CREDIT FACILITY
On December 31, 2004, our subsidiaries in Hong Kong, Tarrant Company
Limited, Marble Limited and Trade Link Holdings Limited (each, a "HK Subsidiary"
and collectively, the "HK Subsidiaries"), entered into a Tenth Deed of Variation
to Syndicated Letter of Credit Facility with UPSC (the "Facility Amendment").
The Facility Amendment amended the HK Subsidiaries' previously existing letter
of credit facility with UPSC, pursuant to which our HK Subsidiaries may arrange
for the issuance letters of credit and acceptances, to, among other things,
reduce the maximum amount of borrowings under the facility by $5 million (to $15
million) and reduce the outstanding balance under the facility to approximately
$15 million. Our HK Subsidiaries and UPSC also agreed to extend the expiration
date of the facility from December 31, 2004 to June 30, 2005.
TERM LOAN FACILITY
On December 31, 2004, our HK Subsidiaries also entered into a new Loan
Agreement with UPSC (the "Loan Agreement"), pursuant to which UPSC made a $5
million term loan to our HK Subsidiaries, the proceeds of which were used to
repay $5 million of indebtedness owed to UPSC under the Syndicated Letter of
Credit Facility. The principal amount of this term loan is due and payable in 24
equal monthly installments of approximately $208,333 each, commencing on
February 1, 2005. Interest on the term loan is payable monthly and accrues at a
rate equal to the "prime rate" (as defined) plus 2%. Under the Loan Agreement,
the HK Subsidiaries are subject to certain restrictive covenants, including that
the Company maintain a tangible net worth of $22 million at each of December 31,
2004 and March 31, 2005 and $25 million as of the last day of each fiscal
quarter thereafter. The Loan Agreement contains customary events of default and
permits UPSC to accelerate the maturity of the full principal amount together
with interest and other amounts owing upon the occurrence of such events of
default.
The obligations under the Loan Agreement are guaranteed by Tarrant
Apparel Group and our subsidiaries, Fashion Resource (TCL) Inc. and Tarrant
Luxembourg Sarl. Additionally, Gerard Guez, our Chairman, signed a personal
guarantee of the Loan Agreement in favor of UPSC, and pledged to UPSC, 4.6
million shares of our common stock held by Mr. Guez to secure the obligations
under the Loan Agreement. The Loan Agreement is secured by the outstanding
shares of our HK Subsidiaries, the assets of our HK Subsidiaries, certain assets
of Tarrant Apparel Group and Fashion Resource (TCL) Inc., and by two promissory
notes payable to Tarrant Luxembourg Sarl in the amounts of $2,550,000 and
$1,360,000.
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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: January 5, 2005 By: /S/ CORAZON REYES
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Corazon Reyes, Chief Financial Officer
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