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Vince Leans on Rebecca Taylor for Financial Assistance

The struggling Vince label is getting creative with its strategy to overcome its financial issues.

The company has entered into an agreement with the Rebecca Taylor brand whereby in the event that Vince faces liquidity issues, Rebecca Taylor would purchase Vince product from approved suppliers. Vince would then purchase those goods from Rebecca Taylor at 103.5 percent of the price it paid.

Under this agreement, Rebecca Taylor would obtain a letter of credit, subject to availability under its credit facility. Once invoiced, Vince would have two business days to pay unless the terms are extended by Rebecca Taylor. If the invoices aren’t paid, Rebecca Taylor would be able to liquidate the goods however it deems appropriate.

The deal was made possible because the two companies are sister brands. Rebecca Taylor is owned by private equity firm Sun Capital Partners, which also holds about 58% of Vince Holding Corporation’s subsidiary, Vince LLC.

Vince has been struggling for months. The company raised questions about its future as a going concern in April, prompting Moody’s to downgrade it, citing possible liquidity issues over the next year and a half. The brand has been trying to transform but was hit by  software issues, which resulted in late deliveries of spring goods. The company also cut its summer delivery.

[Read more about other retailers struggling to survive: Moody’s: Number of Distressed Retailers “Eclipses” Great Recession Rates]

The regain relevance, the label has been making changes to bring it closer to its original DNA. “We engaged our Founders as consultants to help us recapture our brand ecstatic,” said CEO Brendan Hoffman in the company’s Q4 earnings call, according to the Seeking Alpha transcript. “We rebalance the assortment to bring more fashion into the mix and reset our basic replenishment business and we once again began to work with [a] number of our former factories and fabric mills to enhance the quality of our pieces.”

Going forward, Vince is focusing on its seasonless offering and boosting its dress and bottoms business. The company also highlighted off-price and direct to consumer as its most promising channels.

Sales for the first quarter were down 14.2 percent to $58 million, compared to the same period last year. The company reported a net loss of $9.3 million.