Hilfiger Inks Deal with Debt Laden Safilo

Tommy Hilfiger has signed a long-term licensing deal with Safilo in a welcome move for the debt-laden Italian company, one of the largest eyewear manufacturers in the world.

The agreement is for five years, until 2015, with a five-year optional extension, and covers the design, development and distribution of reading glasses and sunglasses bearing the Tommy Hilfiger label. The first examples of products from the new joint venture will hit retail shelves for the autumn 2010 season.

News of the deal was greeted with enthusiasm on the Milan Borsa, where investors drove up Safilo’s share price by 6.8 percent to end Thursday at 0.60 euros, or 89 cents.

The new partners plan to retail the Hilfiger reading glasses in specialty opticians, though the sunglasses will be available throughout the Hilfiger boutique chain, department stores and specialty stores.

Safilo, along with fellow Italian group Luxottica, is one of the two largest producers of high-end eyewear in the industry.

“We are very happy with this new initiative and enthusiastic to work with one of the world’s most prestigious lifestyle brands,” said Roberto Vedovotto, CEO of Gruppo Safilo.

“Tommy Hilfiger, with an internationally recognized appeal as an accessible and contemporary brands, is a perfect addition to our selection of licensed labels. The agreement offers Safilo an extraordinary opportunity to develop glasses for one of the most famous American brands in the world,” added Vedovotto.

“We’re very enthusiastic about working with Safilo, the leading company in the eyewear sector, which will allow us to really develop this business,” said Fred Gehring, CEO of Tommy Hilfiger.

“Safilo’s ample portfolio, global presence and capillary distributive network, along with elevated quality and style, are characteristics that fully integrate with the positioning of our brand, which is both aspirational and accessible,” added Gehring.

Nonetheless, Safilo remains moored in debt problems, ending September 2009 with net debt of 586 million euros, or $867 million.

Safilo only recently avoided bankruptcy thanks to the intervention of Dutch investment firm Hal Holding NV, which made a takeover offer for at least 60 percent of 195 million euros, or $289 million, worth of an outstanding high-yield 2013 Safilo note. Later HAL lowered its acceptance level to 51 percent.

On Thursday, Standard & Poor's lowered its long-term corporate credit rating of Safilo to “default” from “selective default” after some Safilo bondholders agreed to sell their notes at a discount compared to their current value. “Such consent is equivalent to a distressed exchange and, therefore, tantamount to a default,” S&P said in a statement.

However, by signing up with a global brand like Hilfiger, investors would now appear to believe that the HAL deal will go through and that Safilo can take advantage of HAL’s extensive global chain. The Dutch firm, through a series of acquisitions, controls more than 4,000 optical retail locations worldwide.

Based in Padua, Safilo makes eyewear under license for such luxury brands as Gucci, Giorgio Armani, Dior, Alexander McQueen, Stella McCartney, Bottega Veneta, Banana Republic and Marc Jacobs.

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