Centric committee says current financing deal hinders investigation

By Caroline Salls

Pittsburgh, June 17 – Centric Brands, Inc.’s official committee of unsecured creditors objected to the company’s proposed debtor-in-possession financing, according to a Tuesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The committee said it recognizes that the Centric debtors need DIP financing to finance their operations, pay their employees and protect the value of their assets, and the parties have reached agreement in principle on many of the issues raised by the creditor group.

However, the committee said it felt compelled to file the “narrowly tailored” objection to the motion in its current form in connection with a professional fees carve-out and avoidance action liens.

“The proposed financing, as currently structured, limits the committee’s ability to fulfill its statutory and fiduciary mandate to conduct a thorough and impartial investigation if and when one becomes necessary,” the objection said.

“By providing a meaningless challenge budget and a challenge period that is too short to be effective, the final order will preclude the committee from performing its fiduciary duties to creditors.”

Since the DIP facilities are being provided by the same institutions that stand to receive substantially all of the equity of the reorganized debtors, the committee said it is of the utmost importance that it “not be hindered in connection with its efforts to turn over every stone as it endeavors to maximize recoveries for its constituents.”

A hearing is scheduled for June 18.

New York-based Centric Brands is a lifestyle brand collective that designs, sources, markets and sells kids, men’s and women’s apparel, accessories beauty, and entertainment. The company filed bankruptcy on May 18 under Chapter 11 case number 20-22637.

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