NexCen Brands Inc announced that, through a new wholly owned subsidiary, TAF Australia, LLC, it has signed new long-term license agreements with RCG Corporation Ltd. and its subsidiary, The AthleteвЂ™s Foot Australia Pty Ltd., previously the master franchisee for TAF in Australia and New Zealand. The AthleteвЂ™s Foot Australia Pty Ltd. is AustraliaвЂ™s largest specialty retailer of athletic footwear and currently operates 136 TAF franchised stores across Australia and New Zealand.
Under the terms of the new license agreements, which replace all prior franchise agreements among the parties, NexCen received a one-time, non-refundable licensing fee of $6.2 million in cash and, in turn, granted The AthleteвЂ™s Foot Australia Pty Ltd. a royalty-free exclusive license to, and the right to sublicense, the TAF trademarks and trade dress in Australia and New Zealand to open and operate TAF stores in those countries for an initial term of 99 years. The license agreements are renewable for 50-year terms for nominal additional consideration.
In connection with the license agreements, NexCen entered into an amendment of its credit facility with BTMU Capital Corporation, which allows the Company to use up to $1.2 million of the licensing proceeds to invest in its manufacturing facility to expand production capabilities to produce other products beyond cookie dough. The amendment also requires the Company to use $5 million of the licensing proceeds to pay down a portion of its outstanding debt. This repayment will result in interest expense savings of $400,000 on an annualized basis.
Kenneth J. Hall, Chief Executive Officer of NexCen Brands Inc, stated, вЂњWe are very pleased to sign these license agreements with RCG Corporation, which has been a strong steward of the TAF brand for many years. We are confident that, under the license agreements, RCG Corporation will continue to execute on our shared long-term vision for the TAF brand in Australia and New Zealand. We remain committed to the TAF brand and to its expansion globally though our franchise platform. This transaction, with the support of our lender, enables us to further pay down debt, reduce interest expense, and reinvest in our business with the goal of enhancing the CompanyвЂ™s franchised brands, operations and profitability.вЂќ
Ivan Hammerschlag, Chairman of RCG Corporation Ltd. commented, вЂњThese new license agreements with NexCen deliver long-term certainty to our business and are an exceptionally sound deployment of our capital. We look forward to further expanding the TAF brand in Australia and New Zealand as a licensee.вЂќ
Chris Dull, President of NexCen Franchise Management, stated, вЂњOur manufacturing facility has provided high-quality product to our Great American Cookies franchisees and generated profits for the business for over 30 years. Our investment in the facility, which includes our recent establishment of an R&D test kitchen as well as the current capital expenditures to expand its capabilities, demonstrates our commitment to the Great American Cookies brand and our efforts to further utilize the facility across our other QSR franchised brands.вЂќ