Lucky Brand Dungarees and G-Star Raw Retail Inc. both sunk into insolvency Friday, filing for Chapter 11 protection from creditors in the wake of the coronavirus shutdown.
Los Angeles-based Lucky Brand went to court with a stalking horse asset purchase agreement that would see its operating assets sold to SPARC Group, which operates lifestyle brands, including Aéropostale and Nautica. In connection with that transaction, Authentic Brands Group, would acquire the intellectual property of Lucky Brand.
Lucky Brand also signed a back-up agreement with Authentic for the intellectual property should the deal with SPARC not go through.
“To facilitate the sale and reduce its debt burden caused by recent challenges, including the COVID-19 pandemic, Lucky Brand has initiated proceedings under Chapter 11,” said the company, which filed for bankruptcy in Delaware.
During the Chapter 11 process, Lucky Brand and its advisors will “continue to explore potential sale transactions with other parties to achieve the highest or otherwise best offer” for the company.
Lucky Brand will remain operational with the majority of its physical stores, e-commerce platform and wholesale business now open. The company has more than 100 stores in North America, largely located in shopping malls.
Filing Chapter 11, said Matthew A. Kaness, Lucky Brand interim CEO since September and executive chairman, is the “best course of action to optimize the operations and secure the brand’s long-term success.”
“The COVID-19 pandemic has severely impacted sales across all channels,” Kaness said. “While we are optimistic about the reopening of stores and our customers’ return, the business has yet to recover fully.”
Los Angeles-based G-Star Raw Retail Inc. also filed for Chapter 11 bankruptcy on Friday, citing financial woes from the coronavirus crisis.
The largest creditor listed in its bankruptcy is its landlord at 475 Fifth Avenue in New York, owed $426,007, according to Apparel Resources. The flagship store was recently looted during the Black Lives Matter protests.The Dutch-based G-Star Raw specialises in unwashed and untreated denim and has over 6,500 selling points worldwide.