MILAN — The Roberto Cavalli company is facing more troubles as it seeks a new owner and goes through a restructuring plan with creditors.
A spokesman over the weekend said the company’s U.S. subsidiary, operating under the ArtFashion Corp. moniker, is filing for Chapter 7 bankruptcy protection this week, confirming a WWD report on Friday.
This follows the announcement that day that Roberto Cavalli SpA’s board had decided to file a restructuring plan with the Court of Milan that would allow it to continue to operate while holding discussions with creditors under the so-called process of “composition with creditors.”
On the evening of March 29, all U.S. stores ceased operations, going out of business the following day. Merchandise and store keys were taken into custody by a security company, to be handed over to the trustee next week.
There were seven directly operated stores, one corner and four outlets in the U.S., all closed on March 29. The American market accounted for 17 percent of consolidated sales, or 22 percent of direct sales.
ArtFashion was established in 1997.
The U.S. e-commerce operation is suspended until logistic services can be managed out of Europe, said the spokesman.
All employees were informed on Friday evening, and contracts have been terminated. “The final payroll activities are in process to be paid by this week, and final paychecks and severance payments will be handed over on April 3,” explained the spokesman.
ArtFashion employed 93 people, all of whom were let go. The U.S. branch’s CEO, Salvatore Tramuto, has resigned, together with the company’s senior management, but the team is working to finalize the procedure of the filing.
A U.S.-based source lamented that the Italian company “cut all ties with the American subsidiary when the sale [of Roberto Cavalli SpA] did not go through, rendering the company in the U.S. insolvent. They knew for months that we were running out of money and that this could happen, but they did not inform us. They are our financial support, and when they pulled out, that left the American company with no money, and we were told to declare Chapter 7. Employees were let go without notice on Friday.” The source cited a “lack of investments in the company and in marketing.”
Responding to these claims, the spokesman said: “Roberto Cavalli has applied for a restructuring plan to seek an agreement with creditors in order to protect the company during the sale process.” As a consequence, “this led to the suspension of the cash pooling mechanism related to the restructuring plan, which granted financial support to the loss-making U.S. entity ArtFashion Corp.” The estimated loss last year amounted to $17.8 million after years of continued losses, he said, “leaving no other option than to file for Chapter 7 and to close the operations in the U.S. with immediate effect.”
“I understand the stress of ArtFashion’s employees,” said a source close to the American company, “but there is nothing different that the Italian management could have done. With the end of the cash-pooling agreement,” and in view of the restructuring plan with creditors for the Italian company, “the best they could do was to ensure all salaries and severance were paid to the last day. On top of that, it was important to secure all stores and company properties for the trustee to maximize the existing assets. That was done with the support of a security company. I don’t know if the security firm acted too firmly or if some personal sensitivities were hurt. And I do realize that in this situation, all individuals would want to know as far in advance as possible in order to manage their personal life decisions. Unfortunately, due to the specific situation, it wasn’t possible to do otherwise.”
ArtFashion in 2017 registered a loss of $3.8 million, and Roberto Cavalli SpA reported that year a market contribution of around $15.6 million.
Last year, ArtFashion registered a loss of 5.1 million euros ($5.7 million), with a market contribution by the Italian group of around 12.7 million euros.
As of Dec. 31, the Italian group’s debt toward the banks stood at 35 million euros.
Last year, a source said Cavalli owner Clessidra injected 15 million euros into the group through two capital increases.
One Milan-based source said Clessidra cannot legally channel any additional investment in Cavalli because it has “reached its limit as per its statute. Clessidra has invested around 450 million euros, estimated the source, and around half of that went to Cavalli the designer, who retains 10 percent of the company.
Unions have organized a strike to take place on Monday at the Osmannoro Cavalli headquarters outside Florence.
As reported, on Friday, the Cavalli board said the decision of the restructuring plan comes despite ongoing discussions with shareholders and potential investors “with the resources necessary to overcome its current state of financial difficulties.”
“Through this request, the company intends to utilize a well-defined legal mechanism arranged by the legislator to manage and overcome critical phases that could also lead to the suspension of some activities in foreign countries,” stated the company.
The Court of Milan will examine the application and “define a period of time during which the company will keep an open dialogue with all the subjects and competent authorities to define the details of the possible next steps to be carried out.”
As reported, Philipp Plein was said to be interested in taking control of the company but has distanced himself from the negotiations, leaving the American Bluestar Alliance as the only bidder. Creative director Paul Surridge exited the brand this week.
This is the latest development in a long and winding story — and a source underscored how “the situations and the people have changed so many times, it would be hard to understand what went wrong. None of the main players steering the deal are still involved.”
At the end of April 2015, Clessidra Sgr revealed it was buying 90 percent of Roberto Cavalli SpA in a deal that was to be completed by a newly established company called Varenne, controlled by Clessidra but including L-GAM and Chow Tai Fook Enterprises Ltd.
Longtime Bulgari and LVMH Moët Hennessy Louis Vuitton executive Francesco Trapani, who was said to have been a leading force in the negotiations with Cavalli, took on the role of chairman of the firm, while Renato Semerari became the new CEO.
In May 2016, Clessidra was sold to Italmobiliare SpA following the death of its founder, chairman and CEO Claudio Sposito, who had built the fund into one of the most active in Italy’s luxury and fashion arena. Trapani, who succeeded Sposito, left in September that year after the sale to Italmobiliare and is now on the board of Tiffany & Co. and has been investing in several projects including food.
In October 2016, then-creative director Peter Dundas exited the company shortly after the arrival at the end of July of former Versace CEO Gian Giacomo Ferraris, tapped to lead the company succeeding Semerari and tasked with a reorganization of the company and cuts to its workforce that included closing its Milan operations and transfer of all functions to Osmannoro, near Florence. Ferraris had succeeded in turning Versace and Jil Sander around before his arrival at Cavalli.
Carlo Pesenti is CEO of Italmobiliare, and the powerful Pesenti family founded one the largest cement producers in the world, Italcementi, in Bergamo, Italy, in 1864. The Pesentis, who over the years also controlled banks, insurance companies and automaker Lancia, among other investments, are flush with cash after the recent sale of stakes in Italcementi to HeidelbergCement. Sources have been saying for months that Clessidra wants to exit the fashion business.
The agreement with Clessidra revealed at the end of April 2015 was only the last of a long-running saga of Cavalli the designer searching for an investor. Clessidra was in talks with Cavalli as far back as 2009, and at the time, the designer was in discussions to sell a 30 percent stake in his firm, but a deal fell through over price. Before that, in 2006, Cavalli seemed close to selling to Saudi Arabian private equity fund SAB Capital, which submitted a bid for 60 percent of his business, but the designer pulled out of the talks.
Cavalli went back on the hunt for an investor in 2014, and private equity fund Permira was interested in acquiring the entire company, but again, talks broke down over valuation. Bahrain-based Investcorp, a former Gucci owner, was also said to be looking at the company.
Cavalli in 2014 also negotiated for months with the Russian firm VTB Capital, with a deal initially expected to close in the fall, but in a surprising turn of events, the designer started talks with Clessidra in December. VTB Capital is part of VTB Group, a major Russian investment bank, but sources said it was acting for a Cyprus-based fund.
This story was reported by WWD and originally appeared on WWD.com.
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