Centric Brands Inc. is bankrupt.
The umbrella group — which owns brands including Zac Posen and Hudson and holds licenses in various sectors for over 100 labels including Kate Spade, Frye, Jessica Simpson and Timberland — today filed for Chapter 11 protection in U.S. bankruptcy court for the Southern District of New York. Centric Brands listed its assets in the range of $1 billion to $10 million, the same as its estimated liabilities. The company’s lenders have agreed to provide $435 million in debtor-in-possession financing to allow it to continue to operate during the restructuring process.
“Today’s agreement marks the beginning of our next chapter as an even stronger company and builds upon our progress to date executing on our long-term strategy,” said Centric Brands CEO Jason Rabin in a release. ” We thoroughly evaluated all possible strategic options to address this environment. After extensive review, we determined that partnering with our current lenders to pursue this path will result in a stronger financial position and more resources to support future growth, while allowing us to focus on serving key stakeholders.”
According to Rabin, the coronavirus pandemic constrained the company’s cash flow and disrupted its wholesale accounts’ ordering. Centric Brands is planning to reemerge from its bankruptcy as a private company, under the ownership of its current lenders. The corporation will use its debtor-in-possession funding to pay employees, licensors, suppliers, and vendors during Chapter 11 proceedings. According to a release, the Chapter 11 filing will not impact Centric Brands’ decision to reopen “for a majority of its operations.”
“This financial restructuring process will allow us to optimize our operations while maintaining our valued, long-standing relationships with our business partners,” said Rabin. “We look forward to welcoming our employees and customers back as soon as it is safe to do so.”
Over the past few months, the coronavirus crisis has rocked the retail sector, causing individuals to cut discretionary spending and forcing store closures. A number of already-struggling retail players, including J.Crew, JCPenney and Neiman Marcus, have filed for Chapter 11 protection in the last few weeks.