KKR-Financed Clothing Firm Seeks Ch. 11 Protection

By Hailey Konnath
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Law360 (April 5, 2021, 11:16 PM EDT) -- The Collected Group LLC, a women's clothing firm largely bankrolled by global investment company KKR & Co. Inc., filed for Chapter 11 bankruptcy protection Monday, telling a Delaware federal bankruptcy court that the pandemic derailed the company's business and disrupted plans to sell off some of its brands last year.

The California-based company, founded in 2001, is the designer, distributor and retailer behind the apparel brands Joie, Equipment and Current/Elliott. The Collected Group submitted a prepacked plan that it said would offload more than $150 million of its debt, provide for $30 million of exit financing to support operations, and put it in a position to "succeed and capitalize on further growth opportunities."

Right now, The Collected Group has assets worth somewhere between $50 million and $100 million, it said. It has approximately $185.3 million in outstanding funded debt and an additional $35.5 million in unsecured obligations, the company said.

The Collected Group said its financial woes go back to 2017, when its new company-wide enterprise resource-planning system went live without critical warehouse and logistics functionality. That dealt a blow to the company's revenue, distribution, cash flow and wholesale relationships, according to Evan Hengel, The Collected Group's chief restructuring officer.

Hengel said in a declaration that the company restructured in 2018, and it had been marketing some of its assets when the pandemic hit last year.

"The COVID-19 pandemic also compounded certain challenges facing the company, as already-declining foot traffic was decimated upon the onset of the COVID-19 pandemic, with most stores closed in accordance with health guidelines and most consumers meeting their shopping needs online," Engel said. "In addition, certain wholesale counterparties closed their distribution centers and canceled or returned a substantial number of orders."

Monday's prepackaged plan is supported by The Collected Group's secured lenders and equity sponsors, the majority of which are affiliates of KKR, according to the petition.

Hengel said that the company is looking to implement the prepackaged plan "on a timeline that will maximize enterprise value, which the debtors believe will allow the company to emerge from Chapter 11 well-positioned to capitalize on its thriving — and growing — e-commerce platform, as well as its established wholesale channels."

The company intends to continue operating and managing its properties as the bankruptcy case proceeds, Hengel said. It has 125 full-time employees.

Before the COVID-19 pandemic, the company was operating 33 stores, he said in the declaration. But after the virus forced closures and reduced retail traffic, the company decided to close most of its brick-and-mortar locations and focus exclusively on e-commerce.

In 2019, the company's wholesale distributions accounted for 67% of the company's net sales, according to the declaration. But in 2020, in the midst of the pandemic, wholesale accounted for just 45% of net sales, it said.

The Collected Group has anywhere from 200 to 999 creditors, and funds will be available for distribution to unsecured creditors, it said.

Among the clothing company's creditors with the biggest claims is New York City real estate developer RXR Realty, which is owed just under $2.5 million, and Boston-based real estate private equity firm Rockpoint Group LLC, which is claiming more than $2 million.

Century City Mall LLC in Los Angeles is also owed $1.9 million, according to the company's filings.

Counsel for The Collected Group didn't immediately return a request for comment late Monday.

The Collected Group is represented by Andrew L. Magaziner of Young Conaway Stargatt & Taylor LLP.

The U.S. Trustee is represented in-house by Benjamin A. Hackman.

The case is In re: The Collected Group LLC at al., case number 21-10663, in the U.S. Bankruptcy Court for the District of Delaware.

--Editing by Adam LoBelia.

For a reprint of this article, please contact reprints@law360.com.

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