On Monday, the apparel and accessories licensing firm said it has essentially filed a pre-packaged Chapter 11 petition for bankruptcy court protection, and has secured the support of “substantially all” of its secured lenders for $435 million in debtor-in-possession financing.
The New York City-based lifestyle company designs, sources, markets and sells men’s, women’s and children’s products across a range of categories from apparel and accessories to beauty and entertainment. The brand portfolio spans denim labels like Hudson Jeans and Joe’s Jeans to household names such as Calvin Klein, Nautica, Under Armour and Tommy Hilfiger. Owned brands include Zac Posen, Swims and Robert Graham.
Centric’s lender group includes Blackstone, Ares Management Corp. and HPS Investment Partners. The filing, made in a White Plains, N.Y., federal bankruptcy court, will help Centric recapitalize the company by shaving off $700 million from its second lien indebtedness. Upon exit, Blackstone will exchange second lien debt for an equity stake in the reorganized company. Existing senior lenders Areas and HPS will retain their senior loan positions, and will also receive equity interests in the reorganized firm.
Centric Brands said it “intends to continue operating in the ordinary course,” and “plans to emerge from the reorganization as a private company, under the supportive ownership of its current lenders.”
CEO Jason Rabin pointed out how the coronavirus pandemic disrupted not only the firm’s wholesale accounts but also “constrained our cash flow.”
Despite the COVID-19 chaos, Centric remains “confident that with added flexibility in our capital structure, we will be well-positioned for long-term success during this period and beyond,” Rabin said, noting that the company determined that partnering with current lenders will foster a stronger financial position and unlock resources to support future growth.
“Their partnership and support will enhance our ability to continue to grow our business, providing best-in-class design with an unmatched sourcing network, retail partnerships, industry expertise and deep relationships with licensors,” Rabin added.
The Chapter 11 process will not impact Centric’s decision to reopen “relevant locations,” it added.
“We look forward to welcoming our employees and customers back as soon as it is safe to do so,” Rabin said.
Differential Brands Group Inc. in 2018 acquired a significant portion of Li & Fung’s Global Brands Group Holding Ltd., a licensing business, for $1.2 billion. Differential was formed when Robert Graham acquired Hudson Jeans. Once that GBG deal was completed, Differential rebranded as Centric Brands and installed as the new CEO Rabin, who previously was president for North America when the company was operating as GBG. He first joined GBG in 2014 as chief merchandising officer and before that held various positions within the Li & Fung organization.