Current Owner / Elliott Files for Chapter 11 Bankruptcy and Reorganization – Supply Journal
The owner of contemporary celebrity-endorsed women’s brands, Current / Elliott and Joy asked bankruptcy and reorganization Monday night in a deal that would transfer ownership to senior lenders, two decades after its founding.
The Collected Group, owned by private equity group KKR, is seeking to eliminate $ 150 million in debt and withdraw around May 20, according to a Chapter 11 petition and reorganization plan submitted to a court of Delaware bankruptcy. The proposed restructuring, backed by lenders, would not only reduce the lifestyle company’s annual interest expense, but also arm it with exit funding of $ 30 million. If approved by the court, some existing receivables would be converted to loans under an exit facility, the documents said.
Joie, The Collected’s biggest brand, generated about 55% of net sales last year, Evan Hengel, director of restructuring and chief executive of the Berkeley Research Group, said in a statement. “At the height of the retail strategy pursued by the previous management, Joie operated approximately 24 physical outlets,” he added.
Founded in 1976 and relaunched by The Collected in 2010, Equipment generated around 35% of 2020 net sales, while Current / Elliott, inventor of “Boyfriend Jeans,” accounted for 11 percent of net sales.
The Collected operated 33 stores before the pandemic, but had closed those locations to focus on e-commerce – which fueled half of net sales last year – its 305 wholesale doors in the United States and 272 wholesale accounts international. The pandemic-related disruptions reduced retail revenues by 85%, while wholesale revenues fell by almost 70%.
Hengel said The Collected completed an out-of-court restructuring in 2018 and subsequently hired an investment banker to arrange a sale in late 2019 and early 2020. While 37 parties signed no-go deals disclosure and were given access to a “data room.” Interest dried up in March of last year as potential buyers lowered their proposed purchase prices or walked away until there was more of clarity on post-pandemic business terms, Hengel said in the court filing.
The Collected also encountered supply chain issues that hampered their access to inventory, Hengel said. “Inventory scarcity issues were also motivated by the strategic decision to cancel some fashion development seasons. [in fourth quarter] 2020 to mitigate the rise in Covid-19 cases and the associated uncertainty regarding the clothing purchasing habits of customers until the effects of the pandemic wear off, ”he added.
At the time of its bankruptcy filing, The Collected had approximately $ 185.3 million in funded debt outstanding, excluding interest and accrued charges, plus approximately $ 35.5 million in unsecured bonds, which include overdue rents and possible damage claims from the time he dismissed his petition in Chapter 11.
The top 10 unsecured creditors include six owners and four trade receivables. Dayu Garments Co. Ltd. in Hong Kong owes $ 1.4 million, while Jointex Garment Manufactory Ltd, also in Hong Kong, owes $ 1.3 million. High Fashion Garments in Hong Kong owes $ 903,415, while China Ting Fashion Group (USA) LLC in New York has a claim in the amount of $ 748,000. Among the owners, the top three on the list of unsecured creditors are: RXR SL Owner LLC, New York, NY, $ 2.5 million; 421W14 Lessee LP, Boston, Massachusetts, $ 2.0 million, and Century City Mall LLC, Los Angeles, California, $ 1.9 million.