In a bankruptcy declaration with the court, The Rockport Co. LLC interim CFO Paul Kosturos said a “costly and time-consuming separation” from Adidas was among the key factors contributing to the shoemaker’s need to seek Chapter 11 protection this week.
Previously family-owned, Rockport — founded in 1971 in West Newton, Mass. — came under Reebok’s ownership in 1986. Reebok and its subsidiaries were snapped by Adidas in 2005. In early 2015, New Balance Holding, the company’s investment arm, and Boston-based Berkshire Partners LLC bought Rockport from Adidas Group for an estimated $280 million.
But according to Kosturos, the latter split proved more complicated and costly than the firm had anticipated.
“Separation of the [Rockport Group’s] operations from the Adidas Networks was not completed until November 2017 and proved to be more complex, took meaningfully longer and was significantly more expensive than planned,” Kosturos told the court in the May 14 declaration. “In addition, [Rockport] encountered operational challenges during the initial development of [its] own logistics network that negatively impacted revenue.”
The company — which joins an ever-growing list of footwear (and retail, in general) players such as Aerosoles, Nine West Holdings, Payless ShoeSource and Walking Co. that have recently filed bankruptcy — also cited heavy competition, underperforming stores and supply chain interruption as factors sending it to bankruptcy court.
“Over the last three years, [Rockport has] faced economic headwinds and operational challenges that significantly and adversely impacted the operating performance of [its] footwear business,” Kosturos said.
Home to the Aravon, Dunham, Rockport and Cobb Hill collections, the company — and its Canadian subsidiaries — filed Chapter 11 on Monday with a plan to turn ownership over to private equity firm Charlesbank.
The agreement with Charlesbank — which entered a stalking-horse bid as part of a court-supervised sale process — includes Rockport’s global wholesale assets, e-commerce platform and retail operations in Asia and Europe.
Rockport’s potential new owner plans to evaluate Rockport’s North American retail operations and determine whether it will attempt to acquire certain locations. Rockport is seeking court authorization to close the North American retail stores not acquired by Charlesbank or another party.
Throughout the process, customers can continue to shop the brand at department and specialty stores globally, as well as through its e-commerce platform and select retail locations. To do so, Rockport has obtained $20 million in new-money debtor-in-possession financing from noteholders in addition to its existing $60 million credit facility. It has also filed a series of first-day motions seeking authorization to pay employee wages and benefits, honor customer commitments and manage day-to-day operations through the sale process.
The company expects to pay for all goods and services delivered on or after May 14. Payments for good and services prior to the filing will be addressed through Chapter 11. Charlesbank will assume responsibility for payment of certain pre-petition obligations to product suppliers of the acquired assets.