S.D. New York Chapter 11: Centric Brands Inc.
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All Documents Can Be Accessed by Clicking the Case Title Immediately Above
CASE DETAILS
Link: Petition “First Day” Hearing Agenda “Second Day” Hearing Agenda
On May 18, 2020 (the “Petition Date”), Centric Brands Inc. and thirty-four affiliates (collectively, the “Debtors” and, together with their non-debtor direct and indirect subsidiaries, the “Company”) each filed a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York. The Debtors are represented by Ropes & Gray LLP. The case has been assigned to the honorable Sean H. Lane. A hearing on the Debtors’ “Second Day” motions will be held on June 9, 2020 and a “First Day” hearing was held on May 19, 2020.
ABOUT THE DEBTORS
Link: Affidavit in Support
The Company is one of the world’s leading lifestyle brand collectives. The Company designs, produces, merchandises, manages and markets kids’, men’s and women’s apparel and accessories under owned, licensed and private-label brands. Currently, the Company licenses over 100 brands, including AllSaints®, BCBG®, Buffalo®, Calvin Klein®, Disney®, Frye®, Herve Leger®, Jessica Simpson®, Joe’s®, Kate Spade®, Kenneth Cole®, Marvel®, Michael Kors®, Nautica®, Nickelodeon®, Spyder®, Timberland®, Tommy Hilfiger®, Under Armour®, and Warner Brothers®. The Company sells licensed products through both retail and wholesale channels, which has become an increasingly critical element of the Company’s growth strategy. The Company’s wholesale operations include sales of both licensed products and private label brands, and are sold through a cross section of leading retailers such as Amazon, Costco, Dillard’s, JC Penney, Kohl’s, Macy’s, Nordstrom, Ross, Target, TJX Companies, and Walmart, as well as online ecommerce sites. The Company also sells its own brands, including notable names such as Hudson®, Robert Graham®, and SWIMS®, to consumers through Company-operated retail stores and online ecommerce sites. The Company’s total product distribution spans the globe, with thousands of customers in North America and throughout the world.
As of the Petition Date, the Company has approximately 2,119 total employees in the U.S., including 1,524 full-time and 595 part-time employees. As a result of the pandemic, commencing on April 1, 2020, the Company furloughed approximately 1,346 employees and had a reduction in force of approximately 660 employees.
Due to the catastrophic impact of the global COVID-19 pandemic on the world-wide economy, the Company has experienced direct negative impacts on business operations in the form of supply chain disruption, declines in sales activities, reduced customer orders, and demands for timely cash payments from production and distribution partners. The near-total global shutdown caused by COVID-19 has materially and adversely affected the Company’s entire business, both operationally and financially. The Debtors have filed these cases to preserve and maximize the going-concern value of their estates and effectuate a comprehensive restructuring that will right-size their balance sheet, optimize their store footprint, and allow them to continue to provide the goods and products that their customers have come to know. To that end, the Debtors expect to file a plan and disclosure within thirty days of the Petition Date and will endeavor to emerge by the end of September, and at the latest October.
FINANCIAL CONDITION
As of the Petition Date, the Debtors have approximately $1.7 billion of funded debt obligations. The Company has a $163.9 million revolving credit facility, $20 million term loan bridge, $631.9 million first lien term loan (HPS Investment Partners, Ares Capital Corporation); $719.8 million second lien term loan (GSO Capital Partners LP and Blackstone Tactical Opportunities Fund), $200.3 million securitization facility, and $28.7 million unsecured convertible notes plus $10 million in modified convertible notes. The holdings are concentrated among the above funds. HPS, Ares and Blackstone will become lenders in an exit first lien term loan and own the reorganized equity upon emergence from bankruptcy this restructuring. HPS and Ares will own 30% of the equity and Blackstone will own 70% (subject to dilution). The Company is also party to a three-year receivables securitization facility to sell receivables up to an amount of $600 million.
The Debtors filed an 8-K, reporting that they have entered into a restructuring support agreement on May 17 with certain of its creditors and equity holders, including, (i) 50.1% of the holders of the first lien revolving loan claims that collectively hold at least 66.67% of the aggregate principal amount of the first lien revolving loan claims, (ii) 50.1% of the holders of the first lien term loan claims that collectively hold at least 66.67% of the aggregate principal amount of the first lien term loan claims, (iii) 50.1% of the holders of the second lien claims that collectively hold at least 66.67% of the aggregate principal amount of the second lien claims, (iv) all of the lenders under the DIP facilities, and (v) certain holders of the Company’s common stock.
DIP/CASH COLLATERAL MOTION
Links: DIP Motion Securitization Motion Fee Letter Motion
The Company and its stakeholders reached a deal on the key terms of a consensual comprehensive restructuring of the Company’s business and capital structure. The case will be powered by a $435 million DIP credit facility of which $275 million will be provided by the revolving lenders (and will roll-up the prepetition facility) and roll into an exit facility. The remaining $160 million will be a DIP term loan provided by Blackstone which will roll into the exit first lien term loan with the first lien term lenders. The Debtors will continue an existing securitization facility to ensure continued liquidity during the chapter 11 cases, and a path toward a consensual and smooth emergence from chapter 11 with a reduction of over $700 million of the Company’s prepetition indebtedness. The first lien term loan claims are expected to receive recovery in the form of exit first lien term loans and 30% of the reorganized equity. The debtors propose that second lien secured claims will receive their pro rata share of 70% of the reorganized equity, while second lien deficiency claims will be grouped with general unsecured claims with a treatment to be determined.
Related Significant First Day Motions Can Be Accessed by Clicking on the Links Below