Aeropostale announced that it signed a commitment letter with Sycamore Partners and its affiliates for a strategic partnership and $150 million in senior secured credit facilities. The facilities consist of a five-year $100 million term loan facility and ten-year $50 million term loan facility that includes a sourcing arrangement with MGF Sourcing, an affiliate of Sycamore Partners.

Aeropostale retained Barclays as its exclusive financial advisor and placement agent to explore investment and financing alternatives. The commitment letter with Sycamore Partners and its affiliates was the culmination of that review process. Weil, Gotshal & Manges served as legal advisor to Aeropostale.

Under the terms of the commitment letter, Aeropostale will also issue convertible preferred stock to Sycamore Partners. The convertible preferred stock gives Sycamore Partners the right to acquire up to 5% of the company’s common stock at an exercise price of $7.25, the closing price of the company’s common stock on March 12, 2014. Combined with Sycamore Partners’ current ownership of Aeropostale’s outstanding common stock, Sycamore Partners’ ownership on an as-converted basis would increase to approximately 12.3% of the company’s outstanding common stock.

The new strategic sourcing partnership with MGF Sourcing significantly diversifies Aeropostale’s apparel production, and all of the company’s sourcing orders will continue to be awarded through a competitive bidding process. The sourcing partnership will result in Aeropostale’s commitment to complete minimum merchandise purchases each year for ten years. As the company fulfills its minimum purchase requirements under the sourcing partnership, all amortization payments of the associated facility will be fully rebated.

Stefan Kaluzny, a managing director at Sycamore Partners, will be joining Aeropostale’s board of directors upon the closing of this transaction. In addition to Kaluzny, Sycamore Partners will receive the right to appoint one additional member to the board, with a third independent appointee to be mutually agreed upon by Aeropostale and Sycamore Partners. The board will increase from 11 to 12 members.

Thomas P. Johnson, CEO of Aeropostale, commented, “We look forward to working with Stefan and the Sycamore Partners team, and to the valuable retail and operational expertise they bring to Aeropostale. The terms of our commitment letter with Sycamore Partners are very attractive and provide us with significantly improved financial flexibility backed by their substantial knowledge of the retail industry. Once the arrangement is in place, we will have additional runway to continue to implement our merchandising, marketing and operational strategies designed to reposition the Aeropostale brand. Further, the arrangement will enable us to diversify and augment our already powerful sourcing base with MGF Sourcing, which we believe will offer opportunities to further optimize our supply chain. We strongly believe that our strategy is the correct one to drive long-term value for shareholders.”

Aeropostale is a primarily mall-based, specialty retailer of casual apparel and accessories.

Sycamore Partners is a private equity firm based in New York.

MGF Sourcing is one of the largest apparel sourcing, manufacturing, and supply chain companies in the world.

To read the entire press release, click here.