Brooks Brothers Proceeds With New DIP Offer
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Brooks Brothers struck an upbeat note at its first day bankruptcy hearing on Friday in Delaware, submitting a new $80 million debtor-in-possession facility by a joint entity of licensing company Authentic Brands Group and mall operator Simon Property Group.
The DIP offer by ABG and Simon, which the court approved on Friday, was an 11th hour alternative proposal that came in Thursday morning, Brooks Brothers attorney Garrett Fail of Weil, Gotshal & Manges LLP told the court. In fact, the hearing that took place Friday had been postponed from Thursday, as the parties evaluated the rival offer to the $75 million DIP facility from WHP Global with which Brooks Brothers had entered Chapter 11.
The DIP proposal involving the ABG-Simon joint entity, which goes by ABG-BB LLC, also comes with advantages, including a zero percent interest rate, a zero-percent closing fee, and a carve-out of $12 million, Fail told the court.
The goal of the proceedings is to give the retailer a runway to conduct a going concern sale, the company has said. Its advisers have said that the company’s marketing process before the bankruptcy filing had shown “significant interest in Brooks Brothers’ sale process.” The company is in talks with “multiple bidders,” Fail told the court, and said that it will file a motion on bidding procedures in the coming days for an eventual auction in the case.
“It’s still early days, but we are looking at a global plan which includes continuing with most of the brick-and-mortar stores and driving the e-commerce and wholesale businesses,” said Jamie Salter, chief executive officer of ABG. “We are working hard to sustain most of the operations and people in place around the world so that we may carry forward the great brand that Claudio Del Vecchio and his team have built.”
Yehuda Shmidman, ceo of WHP, had no comment. However, sources said his firm intends to bid for the company during the auction.
As the process winds on, access to financing will be critical for the retailer.
“The debtors are entering Chapter 11 with severely limited cash on hand,” Fail told the court on Friday. “Immediate access to the DIP financing is critical to ensure the debtors’ smooth entry into Chapter 11 and to ensure their ability to prudently operate their business during the cases, including running a value-maximizing sale process.”
A representative for Brooks Brothers declined to comment on Friday.
The retailer is privately held and headquartered in New York City, and operates in over 50 countries, across America, Europe, Asia and the Middle East, according to court filings.
A number of the retailer’s more than 4,000 employees have union representation. For instance, the New York New Jersey Regional Joint Board of Workers United represents some 325 workers in the New York metro area, including retail, alterations and manufacturing workers.
A number of other affiliates of Workers United also represent about 200 workers in other cities in retail, alterations and manufacturing. The union told WWD that it plans to apply for a place on the unsecured creditors committee, which will be appointed in the coming weeks.
“The union is disappointed that Brooks Brothers filed for bankruptcy,” it said in a statement Thursday. “It will participate fully in the bankruptcy to protect the wages, benefits, and jobs of its members. The union is committed to helping Brooks Brothers succeed in their efforts to restructure to be more successful.”
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