Centric Brands driven to bankruptcy filing by Covid-19
Brand licensing group Centric Brands Inc. has voluntarily filed for Chapter 11 bankruptcy, revealing plans to emerge as a private company, owned by its private equity lenders.
Made in the United States Bankruptcy Court for the Southern District of New York, White Plains Division, Centric’s filing secures the company $435 million in debtor-in-possession financing from a group of lenders who plan to take over the business under a restructuring support agreement, namely Blackstone, Ares Management and HPS Investment Partners.
The group, which recently added the Zac Posen label to its portfolio of owned brands, which also includes Hudson, Robert Graham, Swims and Avirex, expects to substantially reduce its funded second lien indebtedness by around $700 million through the restructuring plan.
The NYC-based company does not anticipate that the Chapter 11 process will interfere with plans to reopen its locations where possible as coronavirus restrictions are eased. It also expects that the debtor-in-possession funding that it has secured will allow it to continue operations throughout its restructuring, while meeting its financial obligations to employees, licensors, vendors and suppliers.
Centric’s filing makes it the latest in a growing list of companies that have filed for bankruptcy protection due to the economic impact of Covid-19, including department store operators Neiman Marcus Group and J.C. Penney Co., as well as fashion retailer J. Crew Group.
Due to the ongoing health crisis, Centric furloughed some 1,346 associates in April and has also cut 600 employees.
“The current crisis has significantly impacted companies across all sectors. The pandemic disrupted many of our wholesale accounts’ ordering and constrained our cash flow,” commented Centric CEO Jason Rabin. “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.”
Prior to the pandemic, the company was already burdened by a significant debt load and entered bankruptcy proceedings with some $1.7 billion in funded debt, including term loans, revolvers and notes.
Along with its owned labels, Centric also boasts a license portfolio of more than 100 brands, including Calvin Klein, Tommy Hilfiger, Under Armour, Kate Spade, Hervé Léger and Michael Kors.
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