Buyers of St. John Knits Change Deal Terms

St. John Knits Inc.'s buyers have contributed $25 million more than expected and increased their bank debt after a sale of below-investment-grade bonds to help finance the deal attracted insufficient interest. "We ended up financing the deal at the worst possible time in the bond market," said Jim Kelley, with New York-based Vestar Capital Partners, referring to bond market fears that interest rates are on the rise. Vestar is buying the Irvine-based upscale women's clothing company with Chief Executive Robert E. Gray and his family. Vestar will own 77% of the newly structured company, which will be called St. John Knits International Inc. when the deal closes, and the Grays will own almost 16%. Vestar opted to put in another $25 million rather than pay higher interest rates to sell more junk bonds. In exchange for the added investment, the firm will receive redeemable preferred stock, Kelley said. The total purchase price for the company--$534 million, including fees and expenses--has not changed, the company said. The deal, which shareholders approved Monday, is scheduled to close Wednesday. Secured bank debts will now account for $190 million of the purchase price, instead of the $155 million that was initially expected, said Roger Ruppert, St. John's chief financial officer. Junk bonds will cover almost $100 million of the debt rather than the $160 million anticipated.

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