Sequential Brands files Chapter 11 bankruptcy, plans to sell assets

By Sarah Lizee

Olympia, Wash., Aug. 31 – Sequential Brands Group, Inc. began voluntary Chapter 11 proceedings in the U.S. Bankruptcy Court for the District of Delaware on Tuesday with plans to sell substantially all of its assets, according to a press release.

The company said it determined that, as a result of the significant debt on its corporate balance sheet, it was no longer able to operate its portfolio of brands.

Galaxy Universal LLC, a subsidiary of Gainline Galaxy Holdings LLC, and Centric Brands, Inc. are serving as stalking horse bidders for the assets. Specifically, Galaxy will serve as stalking horse bidder for the company’s Active division assets and Centric will serve as stalking horse bidder for the Joe’s Jeans brand.

Sequential has lined up $150 million in debtor-in-possession financing from existing term B lenders. The company said it expects this new financing, together with cash generated from ongoing operations, to provide ample liquidity to support its operations during the sale process. Wilmington Trust, NA is the DIP agent.

The term B lenders may also credit bid for the debtors’ remaining brands via a credit bid of their pre-petition loans.

The proposed transactions will be implemented under the terms of a restructuring support agreement reached between the company and the term B lenders in order to implement a liquidating plan.

Creditor treatment

Under the terms of the liquidating plan, administrative expense claims and priority tax claims will be paid in full or receive other treatment that leaves the claims unimpaired.

Holders of DIP claims will receive their pro rata share of the paydown amount in cash or other treatment that the debtors and claimholders have agreed to. The paydown amount means the amount of cash or other value at the debtors’ estates as of the effective date, including cash at the debtors’ estates following the consummation of each of the sales, minus retained cash.

Holders of other secured claims will receive payment in full in cash of the unpaid portion of their claims, the collateral securing their claims or other treatment leaving their claims unimpaired.

Holders of other priority claims will receive payment in full in cash of the unpaid portion of their claims or other treatment leaving their claims unimpaired.

Following payment of DIP claims, holders of term B lender claims will receive their pro rata share of any paydown amount or other treatment that the debtors and term B lenders have agreed to.

Holders of general unsecured claims will receive their pro rata share of any paydown amount remaining following payment of DIP claims and term B claims.

Holders of section 510 claims will receive their pro rata share of any paydown amount remaining following payment of DIP claims, term B claims and general unsecured claims.

Intercompany claims and interests will be reinstated or canceled.

Holders of parent common stock and other parent equity interests will receive their pro rata share of any paydown amount remaining following payment of DIP claims, term B claims, general unsecured claims and section 510 claims.

Other details

Sequential has filed a number of customary motions seeking court approval to continue supporting its operations during the court-supervised process, including the continued payment of employee wages and benefits without interruption and other relief measures customary in these circumstances.

The company listed $100 million to $500 million in both estimated assets and estimated liabilities.

No unsecured creditors were listed with claims of $1 million or more.

The company’s pre-petition secured debt includes a $130 million revolving loan due 2023, a $102.28 million first-lien term loan A due 2023, a $25.63 million first-lien term loan A-1 due 2023 and a $298.5 million second-lien term loan due 2024.

Gibson, Dunn & Crutcher LLP and Pachulski Stang Ziehl & Jones LLP are serving as Sequential’s legal counsel. Stifel and its affiliate Miller Buckfire & Co. are serving as Sequential’s investment banker.

New York-based Sequential Brands owns, manages and licenses consumer brands across multiple industries. The Chapter 11 case number is 21-11194.

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