PROVIDENCE – Alex & Ani founder Carolyn Rafaelian is suing a private-equity firm now in control of the company, claiming that it is wrongfully holding her in default on a $5 million promissory note, according to a filing in U.S. District Court of Rhode Island on Wednesday.
The filing said that Rafaelian ceded her controlling interest of the company, as well as millions of dollars in stock, to Lion Capital as part of a restructuring of Alex & Ani in September 2019.
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Lion Capital had already purchased a 40% interest in Alex & Ani in 2014 and 2015 for roughly $360 million, the lawsuit said.
Alex & Ani underwent a restructuring in 2019 following a dispute with banks over an alleged default on a $170 million loan impacting a $100 million credit facility. The lawsuit, which only named one of the seven banks overseeing the loan, Bank of America, was voluntarily dismissed later that year.
As part of the deal with Rafaelian, Lion Capital took over negotiations of the loans in question. The agreement required Rafaelian to divest herself of controlling equity interest and management of Alex & Ani, loan the company $7 million and execute a $5 million promissory note to Lion Capital.
The promissory note would have had Rafaelian pay Lion Capital the $5 million over nine months, the lawsuit said, with interest accruing and payable in monthly installments at 3.5% annum.
In the case of a default, the interest was said to increase to 15% per year. Rafaelian’s equity was collateral for the note. The deal also involved deeds of property in California as more security for the repayment.
Rafaelian’s complaint alleges that the deal required her to have interest paid at the maturity of the deal, rather than monthly. Lion Capital allegedly has held Rafaelian in default for not paying interest payments monthly, thus increasing interest payments to the 15% per annum rate.
The lawsuit seeks a resolution declaring that the note was not in default, seeks an injunction on Lion Capital taking action related to foreclosure of assets, and seeks an award of costs of litigation and any other relief as decided upon by the court.
Rafaelian issued a statement to PBN Thursday evening saying, “My heart still belongs to Alex and Ani, but I have faith that Scott Burger, chairman of the board, with extensive experience in the jewelry industry, along with Lion Capital, will maintain the integrity of this brand and fully support the future of Alex and Ani. I remain a committed member of the board and watch as the brand continues to inspire many more people through meaningful product and partnerships. I look forward to announcing my next project in the near future.”
Chris Bergenheim is the PBN web editor. You may reach him at Bergenheim@PBN.com.
This story has been updated to include comment from Rafaelian.
