Suppliers file to push La Senza into bankruptcy
Jan 27, 2020
Multiple La Senza suppliers have filed a Chapter 7 involuntary bankruptcy petition against the lingerie brand that Victoria’s Secret owner L Brands sold to Los Angeles-based Regent LP in 2018, alleging that the retailer has defaulted on its obligations.
A first petition was filed in Delaware by MGF Sourcing US and two other La Senza suppliers on January 24, 2020.
The document claims that MGF, which is owned by private equity firm Sycamore, played a key role in La Senza’s sale to Regent, as the deal depended on the supplier continuing to source products for the lingerie brand.
In order to ensure MGF’s continued collaboration, La Senza committed to obtaining a letter of credit to guarantee the payment of goods from the supplier but apparently never produced the document.
According to the filing, MGF therefore than agreed that La Senza could instead deposit millions of dollars in an escrow account to guarantee payment for goods sourced by the supplier, but the lingerie brand failed to make any of the required payments.
During this time MGF continued to ship goods to La Senza because the company was “not yet substantially delinquent in making payments for goods shipped and the financials it shared with MGF did not reflect insolvency.”
In October of last year, however, La Senza failed to pay for around $10 million in goods shipped to it by MGF. The supplier demanded that La Senza resolve the issue but continued to work with the brand “in good faith.”
By the end of November, La Senza apparently owed MGF $41.7 million and showed no signs that it was making efforts to repair its material breaches.
It’s unclear at this point how much of this sum La Senza’s former parent company, L Brands, could be responsible for, as, according to MGF, the conglomerate committed to guaranteeing $20 million worth of the brand’s orders, placed between June 2019 and May 2020, even after its sale.
MGF also alleges that La Senza refuses to provide it with sufficient financial information for it to be able to make decisions about how to deal with the lingerie brand moving forward.
The supplier made a further bankruptcy filing against La Senza Canada in Toronto on Monday.
Hearing dates are yet to be set in both Delaware and Toronto.
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