Centric Brands Inc, which designs, sources and sells clothing under licensed brands including Calvin Klein, Tommy Hilfiger, Nautica and Under Armour, has filed for Chapter 11 bankruptcy protection as part of a restructuring agreement from which it expects to emerge as a private company.
In a statement today (18 May), Centric Brands said it has entered into a Restructuring Support Agreement (RSA) with most of its secured lenders to recapitalise the company. The move will provide US$435m in debtor-in-possession financing and will allow the firm to operate without interruption throughout the restructuring process.
The agreement contemplates a “timely emergence” from the process with a plan to substantially reduce the company’s funded second lien indebtedness by about $700m.
Centric Brands will continue to operate and intends to emerge from the reorganisation as a private company under the ownership of its current lenders. Blackstone will exchange second lien debt for equity interests in the reorganised company, while existing senior lenders Ares Management Corporation and HPS Investment Partners will retain their senior loan positions and will receive equity interests.
“Today’s agreement marks the beginning of our next chapter as an even stronger company and builds upon our progress to date executing on our long-term strategy,” says CEO Jason Rabin.
“The current crisis has significantly impacted companies across all sectors. The pandemic disrupted many of our wholesale accounts’ ordering and constrained our cash flow. However, we are confident that with added flexibility in our capital structure, we will be well-positioned for long-term success during this period and beyond.
“We thoroughly evaluated all possible strategic options to address this environment. After extensive review, we determined that partnering with our current lenders to pursue this path will result in a stronger financial position and more resources to support future growth, while allowing us to focus on serving key stakeholders.”
For a majority of its operations, Centric Brands said the Chapter 11 process will not impact its decision to reopen relevant locations.
The firm’s portfolio includes more than 100 licensed brands, as well as owned brands such as Hudson, Robert Graham, Swims, Zac Posen and Avirex.
In February, it purchased the Zac Posen brand in a move aimed at providing a platform for expansion into new categories.
Shares in the group were down by 56% at the time of going to press.