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Law360 (May 18, 2020, 4:09 PM EDT) -- Licensing business Centric Brands — whose portfolio includes Calvin Klein, Timberland and Disney — on Monday filed for Chapter 11 protection in a New York bankruptcy court, saying it has struck a deal to cut $700 million in debt as it wrestles with the impact of COVID-19.
Centric said it believes the debt-for-equity restructuring agreement it has reached with its secured lenders to trim more than a third of its debt will give it the flexibility it needs to deal with the disrupted supply chains and plunging consumer demand that has left the company running with a skeleton crew.
"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," CEO Jason Rabin said in a statement.
Centric was founded in 1987 and took its current name after acquiring Global Brands Group in 2018 in a $1.4 billion deal backed by Ares Capital Management LLC, HPS Investment Partners LLC and GSO Capital Partners LP.
Centric's Chapter 11 declaration touts the company as "one of the world's leading lifestyle brand collectives," designing, making and marketing clothing and accessories for more than 100 brand names as well as making private-label clothing for sale through its own website or at 96 U.S. stores. The company said that prior to April it had more than 2,100 employees in the U.S.
According to the declaration, the company currently has about $1.7 billion in debt, nearly all secured.
In the Chapter 11 declaration, Chief Financial Officer Anurup Pruthi said COVID-19 has had a "catastrophic impact" on supply chains and consumer demand, as well as prompting cash payment demands from producers and distributors. As a result, in April it laid off 660 employees and furloughed more than 1,300.
"The near-total global shutdown caused by COVID-19 has materially and adversely affected the company's entire business, both operationally and financially," he said.
Under the terms of the restructuring agreement, investment firm Blackstone will exchange second-lien debt for equity, the company said. Senior lenders Ares and HPS will retain their positions and receive equity interests as well, it said.
The company said Ares, HPS and Blackstone had agreed to provide $435 million in debtor-in-possession financing to allow business to continue in its normal course.
Centric has retained PJT Partners Inc. as its financial adviser and Alvarez & Marsal as its restructuring adviser.
Centric is represented by Gregg M. Galardi, Cristine Pirro Schwarzman, Daniel G. Egan and Emily Kehoe of Ropes & Gray LLP.
The case is In re: Centric Brands Inc. et al., case number 20-22637, in the U.S. Bankruptcy Court for the Southern District of New York.
--Editing by Stephen Berg.
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