Centric Brands Inc., a New York-based brand licensing group, has filed for Chapter 11 bankruptcy as a result of the financial impact caused by the Covid-19 pandemic. The company plans to emerge from bankruptcy as a privately owned entity, with its private equity lenders taking control. The filing, submitted to the United States Bankruptcy Court for the Southern District of New York, provides Centric Brands with $435 million in debtor-in-possession financing from lenders such as Blackstone, Ares Management, and HPS Investment Partners. This financing will allow the company to continue its operations while it undergoes a restructuring process.
One of the main goals of the restructuring plan is to significantly reduce Centric Brands’ second lien indebtedness by approximately $700 million. The company aims to achieve this by implementing cost-cutting measures and streamlining its operations. Despite the bankruptcy filing, Centric Brands remains optimistic about reopening its locations as Covid-19 restrictions ease. The company believes that the Chapter 11 process will not hinder its plans for recovery.
The Covid-19 pandemic has forced many companies to seek bankruptcy protection, and Centric Brands is not an exception. Other notable retailers that have filed for bankruptcy due to the pandemic include Neiman Marcus Group, J.C. Penney Co., and J. Crew Group. Prior to the crisis, Centric Brands already faced financial challenges, as it carried a significant debt burden of $1.7 billion. These challenges led the company to furlough 1,346 associates and lay off 600 employees in April.
Nevertheless, Centric Brands CEO Jason Rabin remains confident in the company’s future success. He believes that the restructuring will provide Centric Brands with increased flexibility in its capital structure, positioning it well for long-term growth. In addition to owning brands like Zac Posen, Hudson, Robert Graham, Swims, and Avirex, Centric Brands also holds licensing agreements for over 100 well-known brands, including Calvin Klein, Tommy Hilfiger, Under Armour, Kate Spade, Hervé Léger, and Michael Kors. The bankruptcy filing and the subsequent restructuring aim to secure the company’s financial stability and help it navigate the evolving retail landscape.