Global Brands unit files bankruptcy, cites Covid-19, retail struggles

By Sarah Lizee

Olympia, Wash., July 29 – Global Brands Group Holding Ltd. subsidiary GBG USA Inc. and 10 affiliated debtors filed Chapter 11 bankruptcy on Thursday in the U.S. Bankruptcy Court for the Southern District of New York, according to a press release.

The group’s global brand management and Europe wholesale businesses are not included in the filing and continue operations.

GBG USA has entered into a stalking horse asset purchase agreement with WH AQ Holdings LLC as purchaser and Hilco Brands LLC as guarantor for the purchase of the debtors’ Aquatalia brand and business.

The stalking horse bid provides a purchase price of $17.3 million, and the APA is subject to higher or otherwise better offers, among other conditions. The stalking horse agreement has a 4% breakup fee and a $300,000 expense reimbursement.

GBG USA is also pursuing the sale of a substantial portion of its remaining assets, including Ely & Walker, Airband, MagnaReady, Yarrow, b New York and JUNIPERunltd.

Under the proposed bid procedures, bids would be due by 5 p.m. ET on Sept. 13, an auction, if needed, would be held on Sept. 15, and a sale hearing would be held on Sept. 17.

The company said these actions follow the recent sale of the group’s South Korean Spyder business to Alpha Vista Investment Co., Ltd., the sale of Spyder USA’s inventory and related assets to Liberated-Spyder LLC, and the sale of Frye’s inventory and related assets to ABG Frye LLC.

“Over the past 18 months the retail landscape has been greatly impacted by Covid-19, creating hardships for us and many others across our industry,” Rick Darling, chief executive officer of Global Brands Group, said in the release.

“Our business has also been impacted by ongoing structural shifts in the retail industry, as well as persistent geopolitical tensions that have disrupted supply chains. These factors have been especially detrimental to GBG USA.”

The company said the recent sales of Spyder and Frye’s inventory and related assets provided GBG USA with cash collateral to meet its immediate liquidity needs. This has also reduced the need for supplemental debtor-in-possession financing for the Chapter 11 process.

DIP terms

GBG USA has further received $16 million in DIP financing from ReStore Capital, LLC to support its additional liquidity needs during the Chapter 11 cases.

The facility is set to mature in six months and bears interest at Libor plus 800 basis points. Default interest would be an additional 2%.

The DIP facility has a 4% closing fee and a 4½% exit fee.

The DIP facility, coupled with the consensual use of cash collateral, should provide GBG USA with sufficient funding to implement its sale strategy in an orderly manner and to maximize value for all stakeholders, the company said.

GBG USA has also filed a number of customary motions with the court seeking authorization to support its operations, including authority to continue payment of employee wages and maintain health care benefits and other relief measures customary in these circumstances.

The company listed $1 billion to $10 billion in both assets and liabilities.

Creditors

The company’s largest unsecured creditors are KR Hollywood, LLC, based in Los Angeles, with an undetermined rent claim; Kenneth Cole Productions, Inc., based in Secaucus, N.Y., with a $6 million royalties claim; Authentic Brands Group, LLC, based in New York, with a $3.56 million royalties claim; ERST 1333 Broadway, LLC, based in Brooklyn, N.Y., with a $2.49 million rent claim; PPF RTL 113 Spring Street, LLC, based in New Orleans, with a $2.17 million rent claim; Brand Matter, LLC, based in New York, with a $2 million royalties claim; and 144 5th Retail LLC, based in New York, with a $1.51 million rent claim.

As of the petition date, GBG’s debt totals $238.4 million, consisting of, among other things, $126.5 million under a pre-petition revolving credit facility and $108.3 million under four separate second-lien bilateral bank facilities.

Willkie Farr & Gallagher LLP is serving as GBG USA’s legal counsel. Ankura Consulting Group is serving as GBG USA’s restructuring adviser and Ducera Partners is serving as GBG USA’s financial adviser.

New York-based GBG USA is primarily engaged in operating the wholesale and direct-to-consumer footwear and apparel business in North America. The company filed bankruptcy under Chapter 11 case number 21-11369.

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