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Debt

12 Months Ended

Dec. 31, 2024

6. Debt

The Company’s net carrying amount of debt was comprised of the following:


	December 31,		December 31,
($ in thousands)	2024		2023
Term loan debt	$	7,950	$	5,000
Unamortized deferred finance costs and other reductions to carrying value		(1,381)		(279)
Total		6,569		4,721
Current portion of debt		—		750
Long-term debt	$	6,569	$	3,971

For the Current Year and Prior Year, the Company incurred interest expense of approximately $0.6 million and $0.1 million, respectively, related to term loan debt. The effective interest rate related to term loan debt was approximately 11.9% and 11.6% for the Current Year and Prior Year, respectively.

Previous Term Loan Debt (October 19, 2023 through December 11, 2024)

On October 19, 2023, H Halston IP, LLC (the “Borrower”), a wholly owned indirect subsidiary of Xcel Brands, Inc., entered into a term loan agreement with Israel Discount Bank of New York (“IDB”). Pursuant to this loan agreement, IDB made a term loan to the Company in the aggregate amount of $5.0 million. The proceeds of this term loan were used to pay fees, costs, and expenses incurred in connection with entering into the loan agreement, and may be used for working capital purposes. Such costs incurred in connection with the borrowing included a commitment fee paid to IDB, plus various legal and other fees. These fees and costs totaling $0.30 million were deferred on the Company’s balance sheet as a reduction of the carrying value of the term loan debt, and were being amortized to interest expense over the term of the debt using the effective interest method.

In connection with October 2023 loan agreement, the Borrower and H Licensing, LLC (“H Licensing”), a wholly owned subsidiary of Xcel, entered into a security agreement (the “Security Agreement”) in favor of IDB, and Xcel entered into a Membership Interest Pledge Agreement (the “Pledge Agreement”) in favor of IDB. Pursuant to the Security Agreement, the Borrower and H Licensing granted to IDB a security interest in substantially all of their respective assets, other than the trademarks owned by the Borrower and H Licensing, to secure the Borrower’s obligations under the October 2023 loan agreement. Pursuant to the Pledge Agreement, Xcel granted to IDB a security interest in its membership interests in H Licensing to secure the Borrower’s obligations under the October 2023 loan agreement.

The term loan was to mature on October 19, 2028. Principal on the term loan was payable in quarterly installments of $250,000 on each of January 2, April 1, July 1, and October 1 of each year, commencing on April 1, 2024. The Borrower had the right to prepay all or any portion of the term loan at any time without penalty.

Interest on the October 2023 term loan accrued at “Term SOFR” (as defined in the loan agreement as the forward-looking term rate based on secured overnight financing rate as administered by the Federal Reserve Bank of New York for an interest period equal to one month on the day that is two U.S. Government Securities Business Days prior to the first day of each calendar month) plus 4.25% per annum. Interest on the term loan was payable on the first day of each calendar month.

The October 2023 term loan agreement contained customary covenants, including reporting requirements, trademark preservation, and certain financial covenants including annual guaranteed minimum royalty ratio, annual fixed charge coverage ratio, and minimum cash balance levels, all as specified and defined in the loan agreement. The Company was in compliance with all applicable covenants under the loan agreement as of and for all periods presented in the financial statements.

In addition, on October 19, 2023, the Borrower also entered into a swap agreement with IDB, pursuant to which IDB agreed to pay the Borrower Term SOFR plus 4.25% per annum on the notional amount of the swap in exchange for the Borrower paying IDB 9.46% per annum on such notional amount. The term and declining notional amount of the swap agreement was aligned with the amortization of the October 2023 term loan principal amount.

New Term Loan Debt

On December 12, 2024, the Company and certain of its subsidiaries entered into a new loan and security agreement with FEAC Agent, LLC, as administrative agent and collateral agent, FEF Distributors, LLC, as lead arranger, and Restore Capital, LLC, as agent for certain lenders, pursuant to which the lenders made term loans to the Company and agreed to make additional term loans to the Company upon the satisfaction of a condition precedent described in the loan agreement. The term loans under the loan agreement are as follows: (1) a term loan in the amount of $3.95 million (“Term Loan A”) was made on the closing date, (2) a term loan in the amount of $4.0 million (“Term Loan B”) was made on the closing date, and (3) a term loan in the amount of $2.05 million (“Delayed Draw Term Loan”; Term Loan A, Term Loan B and Delayed Draw Term Loan are referred to as “Term Loans”) which will be made upon the satisfaction of a condition precedent described in the loan agreement. The proceeds from Term Loan A and Term Loan B were used to repay the remaining balance of the Company’s October 2023 term loan with IDB, as well as to pay fees, costs, and expenses incurred in connection with entering into the new loan agreement, and the balance may be used for working capital purposes. The proceeds from the Delayed Draw Term Loan will be deposited in a bank account to satisfy a liquidity covenant in the loan agreement.

Principal amounts on Term Loans are payable on a pro rata basis in quarterly installments of $250,000 on each of March 31, June 30, September 30, and December 31 of each year, commencing on March 31, 2026, with the unpaid balance due at the maturity date of December 12, 2028.

The aggregate future principal payments under the Term Loans are as follows:


	Amount of
($ in thousands)	Principal
Year Ending December 31,	Payment
2025	$	—
2026		1,000
2027		1,000
2028		8,000
Total	$	10,000

Interest on Term Loans accrues at an annual rate equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York for an interest period equal to three months, subject to a 2.0% floor, plus (i) 8.5% for Term Loan A and Delayed Draw Term Loan and (ii) 13.5% for Term Loan B. Interest on amounts outstanding under the Term Loans accrues daily and is payable at the end of each calendar month.

In connection with entering into the Terms Loans, the Company incurred loan origination fees, plus various legal and other fees. These fees and costs totaling $0.92 million were deferred on the Company’s balance sheet as a reduction of the carrying value of the term loan debt.

Also in connection with entering into the Terms Loans, the Company issued warrants to the lenders to purchase an aggregate of 145,664 shares of the Company’s common stock. These warrants have an exercise price of $6.32 per share, are immediately exercisable, and expire on December 12, 2034. In accordance with applicable GAAP, the Company allocated the value of the total proceeds of $10.0 million between the term loan debt and the warrants, based on the relative fair values of each. The fair value of the term loan debt was determined using a net present value calculation, while the fair value of the warrants was determined using a Black-Scholes option pricing model. As a result, the Company recognized a $0.48 million increase to stockholders’ equity as additional paid-in capital for the allocated fair value of the warrants, and an offsetting decrease to the net carrying value of the term loan debt.

These reductions to the carrying value of the term loan debt totaling $1.40 million are being amortized to interest expense over the term of the debt using the effective interest method.

The loan agreement also requires that the Company pay an exit fee of $175,000 for the ratable benefit of the Term Loan A lenders and an exit fee of $375,000 for the ratable benefit of the Term Loan B lenders upon the maturity or full payment of the Term Loans. The Company is accruing the cost of these exit fees over the term of the related debt.

The Term Loans are guaranteed by certain direct and indirect subsidiaries of the Company, and are secured by all of the asset of the Company and such subsidiaries. The loan agreement contains various customary financial covenants and reporting requirements, as specified and defined in the loan agreement. The Company was in compliance with all applicable covenants under the loan agreement as of and for all periods presented in the financial statements.

As a result of the debt refinancing transaction on December 12, 2024 as described above, the Company recognized a loss on extinguishment of debt of approximately $0.3 million (primarily comprised of the write-off of $0.2 million of remaining unamortized deferred finance costs related to the October 2023 IDB term loan debt, and $0.1 million paid to exit the interest rate swap agreement with IDB) during the Current Year.

The Company subsequently refinanced its term loan debt again in April 2025; see Note 12 for additional information.