US fashion group Centric Brands has filed for Chapter 11 bankruptcy as part of a restructuring agreement that is likely to see it emerge as a private business.
The New York-based wholesaler said on Monday that it reached an agreement with largest lenders including Blackstone, Ares Management Corporation, and HPS Investment Partners.
The company struck a deal to secure $435m in the form of a debtor-in-possession business loan, a financial lifeline that seeks to support the company’s restructuring plan by allowing it to run as a going concern.
The firm, which distributes apparel for many brands including Calvin Klein (pictured), Tommy Hilfiger, and Nautica under licensing agreements, plans to become a private company while reducing $700m in debt to navigate the turmoil caused by the coronavirus health emergency, which has hit its profitability.
Centric Brands chief executive Jason Rabin said: “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.”
Shares of Centric Brands (CTRC) nosedived this morning, losing nearly 50% on pre-market trading. Meanwhile, the stock has lost 57% of its value so far this year, as the retail industry continues to feel the economic impact of store shutdowns.
The restructuring support agreement signed by Centric Brands and the three lenders also contemplates the transformation of Blackstone’s second lien debt into an equity stake in the firm. Moreover, Ares and HPS will maintain their senior loans as is while receiving additional equity in the company as part of the deal.
Centric has appointed consulting firms Alvarez & Marsal, Ropes & Gray, Dechert, PJT Partners, as advisors to assist with the proceeding. The company also appointed former L Brands executive Laura Ritchey as chief operating officer in early February.
According to its latest quarterly financial report filed in September 2019, the company had $19m in cash and equivalents and approximately $2.23bn in total liabilities. Total assets by the end of the quarter were $2.15bn.