Bankrupt Centric Brands’ Reorganization Plan Gets Court Approval — What’s Next

Samantha McDonald
·2 mins read

Centric Brands Inc. has received approval for its reorganization plan.

The bankrupt lifestyle group announced today that a judge in the United States Bankruptcy Court for the Southern District of New York gave it the green light to move forward with its $700 million Chapter 11 plan. The go-ahead was given to the company after it paid nearly $6 million to end objections and legal claims from its unsecured creditors. (The plan is also supported by the company’s secured lenders.)

“Today’s announcement represents a critical moment in our journey to emerge as an even stronger company, poised for long-term growth,” CEO Jason Rabin said in a statement. “I am truly grateful to our dedicated employees for their hard work throughout this process and the COVID-19 pandemic. I’m also appreciative of the continued support of our brand licensors, retailers, sourcing network and lenders, which has allowed us to reach this milestone.”

He added, “We continue to execute against our strategy while maintaining our valued, long-standing relationships with our business partners. With a strengthened financial position, I am excited about our strong future ahead.”

After all conditions have been finalized, Centric Brands — whose owned brands include Zac Posen, Hudson and Swims — plans to exit Chapter 11 by the end of October with a “recapitalized” balance sheet, as well as new financing facilities, “significantly reduced” debt and interest payments, plus the full support of all of its lenders.

What’s more, the group expects to emerge as a private company under the ownership of its current lenders, led by Blackstone, Ares and HPS. While Blackstone will exchange Centric Brands’ second lien debt for equity interests, Ares and HPS will retain their senior loan positions and receive equity interests in the reorganized company.

The New York-based business will also secure new financing in the form of a new securitization facility, as well as new revolving and term loan facilities that will help fund its exit from bankruptcy and operations moving forward.

Centric Brands — which holds licenses for more than 100 labels including Kate Spade, Frye, Jessica Simpson and Timberland — filed for Chapter 11 protection in mid-May as the coronavirus pandemic took hold in the United States. At the time, it listed its assets in the range of $1 billion to $10 million, about the same as its estimated liabilities.

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