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Current/Elliott Owner Files for Chapter 11 Bankruptcy and Reorg

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The owner of celebrity-approved contemporary women’s brands Equipment, Current/Elliott and Joie filed for bankruptcy and reorganization Monday night in a case that would shift ownership to senior lenders, two decades after its founding.

The Collected Group, owned by private equity group KKR, is looking to eliminate $150 million in debt and exit around May 20, according to a Chapter 11 petition and reorg plan submitted to a Delaware bankruptcy court. The lender-backed proposed restructuring would not only reduce the lifestyle company’s annual interest expenses but also arm it with $30 million in exit financing. If approved by the court, some existing claims would be converted into loans under an exit facility, documents show.

Joie, The Collected’s largest brand, drove roughly 55 percent of net sales last year, chief restructuring officer and managing director of Berkeley Research Group Evan Hengel said in a statement. “At the height of the retail strategy pursued by prior management, Joie operated approximately 24 brick-and-mortal retail locations,” he added.

Founded in 1976 and relaunched by The Collected in 2010, Equipment drove about 35 percent of 2020’s net sales, while Current/Elliott, inventor of the “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 last year’s net sales—its 305 U.S. wholesale doors, and 272 international wholesale accounts. Pandemic-related disruptions crimped retail revenues by 85 percent while wholesale revenues suffered a nearly 70 percent drop.

Hengel said The Collected completed an out-of-court restructuring in 2018 and subsequently hired an investment banker to arrange a sale during late 2019 and early 2020. While 37 parties signed non-disclosure agreements and were given access to a “data room,” interest dried up in March last year, with potential buyers either reducing their proposed purchase prices or walking away until there was more clarity on post-pandemic business conditions, Hengel said in the court filings.

The Collected also experienced supply chain challenges that hampered its access to stock, Hengel said. “Inventory scarcity issues were also driven by the strategic decision to cancel certain fashion development seasons [in fourth quarter] 2020 to mitigate against rising Covid-19 cases and the related uncertainty with respect to customer apparel buying habits until the pandemics effects subside,” he added.

At the time of its bankruptcy filing, The Collected had about $185.3 million in outstanding funded debt, exclusive of accrued interest and fees, plus about $35.5 million in unsecured obligations, which include past due rent and possible damage claims from when it rejected store leases before its Chapter 11 petition.

The top 10 unsecured creditors include six landlords and four trade claims. Dayu Garments Co. Ltd. in Hong Kong is owed $1.4 million, while Jointex Garment Manufactory Ltd, also in Hong Kong, has a claim of $1.3 million. High Fashion Garments, in Hong Kong, is owed $903,415, while China Ting Fashion Group (USA) LLC in New York has a claim for the amount of $748,000. Among the landlords, the top three on the unsecured creditors list are: RXR SL Owner LLC, New York, N.Y., $2.5 million; 421W14 Lessee LP, Boston, Mass., $2.0 million, and Century City Mall LLC, Los Angeles, Calif., $1.9 million.

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