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Sequential Bankruptcy: Who’s Stalking the Assets?

Troubled brand management firm Sequential Brands Group on Tuesday filed a Chapter 11 petition for bankruptcy court protection.

The filing was in a Delaware bankruptcy court. Sequential said it will use the process for a sale of the company and its assets. The petition listed assets of $442.8 million and liabilities of $435.1 million. Fifteen other affiliates of Sequential also filed their respective Chapter 11 petitions.

As part of the process, Sequential has already inked two stalking horse agreements for some of its assets. Centric Brands signed an agreement to acquire Joe’s Jeans for $42 million, or $38.25 million plus an earnout over a five-year period, while Galaxy Gainline Holdings LLC will acquire the active division brands from Sequential for $333 million, according to court documents. Both purchases are subject to bankruptcy court approval and to better offers at auction. Zac Posen parent Centric Brands in October 2020 successfully exited bankruptcy proceedings.

Sequential Brands Group, which filed a Chapter 11 petition in a Delaware bankruptcy court on Tuesday, is selling Joe's Jeans and And1.
The Jessica Simpson collection is the most successful brand under Sequential’s portfolio. Company Website

Of all the brands still under Sequential’s stewardship, Jessica Simpson remains the most successful in its portfolio, and Simpson is expected to try to buy back her popular lifestyle label. Other brands include Justin Timberlake’s William Rast, Gaiam, Avia and And1. Galaxy is interested in the Avia and And1 brands, and is a key licensee for And1.

The company at the end of July sold the Ellen Tracy and Caribbean Joe brands to privately-held GMA Group. According to a filing with the Securities and Exchange Commission, GMA paid Sequential subsidiary Brands Matter $17 million for Ellen Tracy and $3 million for Caribbean Joe. Sequential also sold the Heely’s brand in April and the Elan Polo brand in July.

Centric is also number one on the list of Sequential’s top 20 creditors holding the largest unsecured claims. Centric’s claim is for trade debt of $503,000. The other unsecured creditors rounding out the top ten hold claims for professional services.

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Among Sequential’s equity owners holding more than a 10 percent stake in the company are the Martha Steward Family Limited Partnership at 10.9 percent and Tengram Capital partners Gen2 Fund LP, at 11.5 percent. The Martha Stewart Living Omnimedia and Emeril Lagasse brands were sold in April 2019.

In a declaration in support of Sequential’s Chapter 11 filing, chief financial officer Lorraine DiSanto said the company began exploring the possibility of selling some assets after receiving unsolicited interest from third parties. The company subsequently decided in November 2019 to explore the sale of the company’s activewear division. With revenues on the decline, the company ultimately decide to put itself up for sale that same year, but hit a roadblock in March 2020 when the formal sale process was benched due to the Covid-19 outbreak.

The company was able to secure a $150 million debtor-in-possession financing from its existing Term B lenders.