GBG USA files for Chapter 11 bankruptcy protection

October 2021 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

October 2021 Issue

In another major blow for the US retail sector, apparel and fashion company GBG USA Inc., along with its North America wholesale business and certain subsidiaries and affiliates, has filed for Chapter 11 bankruptcy.

In conjunction with the Chapter 11 filing, GBG USA – an indirect wholly-owned subsidiary of Global Brands Group Holding Limited – has received $16m in debtor-in-possession (DIP) financing to support its additional liquidity needs during the process.

The DIP facility is expected to provide the company with sufficient funding to implement its sale strategy and maximise value for its stakeholders.

The company has also filed a number of customary motions with the bankruptcy court seeking authorisation to support its operations, including authority to continue payment of employee wages and maintain healthcare benefits and other relief measures.

As separate legal entities from GBG USA, Global Brands Group’s global brand management and European wholesale businesses are not included in the Chapter 11 filing and continue to maintain ongoing operations.

“Over the past 18 months the retail landscape has been greatly impacted by COVID-19, creating hardships for us and many others across our industry,” said Rick Darling, chief executive of Global Brands Group. “Our business has also been impacted by ongoing structural shifts in the retail industry, as well as persistent geopolitical tensions that have disrupted supply chains.

“These factors have been especially detrimental to GBG USA,” he continued. “We have taken significant steps over the last year to strengthen our financial position, while also conducting a thorough review of all strategic options for GBG USA and its brands.”

To help strengthen its financial position, the company is selling its Aquatalia brand and business, as well as a substantial portion of its Ely & Walker, AIRBAND, MagnaReady, Yarrow, b New York and JUNIPERunltd assets. These actions follow the recent sale of Global Brands Group’s South Korean Spyder business and Spyder USA’s inventory and related assets.

“We have taken and continue to take measures to help improve performance, reduce the cost base and improve working capital,” added Mr Darling. “I am extremely grateful to our employees across the globe who have demonstrated agility and dedication while continuing to serve our customers and supply chain partners in this period of uncertainty.”

As far as GBG USA’s remaining assets are concerned, the company has determined that a court-supervised process to facilitate a sale is the best course of action to maximise value for all stakeholders and address the financial position of GBG USA and the Global Brands Group in a fair and transparent manner.

Serving as GBG USA’s legal counsel during the Chapter 11 process is Willkie Farr & Gallagher LLP. Ankura Consulting Group is serving as restructuring adviser and Ducera Partners is serving as financial adviser.

Mr Darling concluded: “GBG USA has compelling brands and products and a highly talented team, and we believe the Chapter 11 process represents the best opportunity for GBG USA’s employees and business.”

Fraser Tennant