US company Global Brands files for bankruptcy

Dive brief:

  • The American arm of the clothing manufacturer and owner of the Global Brands Group brand filed for chapter 11 with plans to sell key assets.
  • The company has made an offer of $ 17.3 million for the stalking horse for its Aquatalia brand. GBG USA is also looking to sell “a substantial portion of its remaining “bankrupt assets, including Ely & Walker, Airband, MagnaReady, Yarrow, B New York and Juniper unltd.”
  • The bankruptcy comes after the company sold assets and inventory related to the Frye and Spyder brands. Brand owner Authentic Brands recently reassigned these licenses to new operating partners amid the financial turmoil at Global Brands.

Dive overview:

As GBG USA’s own CFO put it, the company has gone bankrupt. “operate with fumes” after COVID-19 hit clothing sales worldwide.

The company’s parent company was once part of the supply chain conglomerate Li & Fung until it was merged into its own company in 2014, which until recently was listed on the Hong Stock Exchange. Kong.

It both owns its own brands and manufactures and sources products under license for other brand owners. Among the brands owned by GBG USA are those that the company tries to sell and file for bankruptcy online, while it licenses the All Saints, Le Tigre, Capezio and Saga brands. The company also manufactures private label products, including a shoe brand for Macy’s.

According to GBG USA CFO Mark Caldwell, around 85% of Global Brands sales come from wholesale, including from large retailers such as Macy’s, Costco, TJ Maxx, Amazon, Nordstrom, Dillard’s, Burlington, Bloomingdale’s and Neiman Marcus.

The deleterious impact of COVID-19 on the clothing industry has been well documented. Customers avoided clothing stores as well as offices and social events that drive wardrobe spending. According to Caldwell, GBG USA’s own sales fell 44% in the fiscal year that ended in March and included the most trying times of the pandemic.

At the same time, the pandemic has hit the company’s supply chain, manufacturers running out of capacity or materials, and distribution networks “increasingly behind schedule,” Caldwell said in court documents. All of this was exacerbated by Global Brands’ liquidity issues. Some of its suppliers, wary of Global Brands’ financial woes, have demanded cash on delivery and have also tightened conditions, exacerbating its operational and financial woes.

Royalty obligations to brand owners are another burden on the company’s balance sheet. Caldwell specifically highlighted the guaranteed minimum royalties owed to Authentic Brands Group. While the licensing deal for Frye and Spyder was canceled after GBG sold off the license assets, the company is still tied to the brand conglomerate for around $ 3.6 million, according to court documents.

GBG also owes royalties to Kenneth Cole ($ 6 million), Sequential Brands ($ 2 million) and Marquee Brands ($ 860,000).

These numbers highlight some of the hidden risks of the model championed by Authentic Brands and its intellectual property-hungry peers. While brand conglomerates outsource much of their operations and, with them, debts to third-party partners like Global Brands, the finances of brand owners are intertwined with those of their partners. In its recent IPO filing, Authentic Brands revealed that Global Brands is one of its key operating partners.

As Global Brands refrained from lenders and suffered greater distress, the company has sold assets and is looking to sell more. The company has signed 30 confidentiality agreements with potential buyers of various assets, Caldwell said.

From this process arose the sale of assets related to the Frye and Spyder brands belonging to Authentic Brands, as well as the stalking horse offering for Aquatalia from an LLC affiliated with the investment firm Windsong Global. In bankruptcy, the company is essentially trying to sell itself piecemeal.

GBG wishes to give potential buyers 50 days to submit offers for individual products or packages of the company’s brands.

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