Lack of Liquidity Forces Global Brands Group to Shutter Business
Global Brands Group is winding down its operations.
On Monday, the Hong Kong-based company said that after a hearing on Friday in Bermuda, the court ordered that the company be “wound up.” The court appointed John C. McKenna of Finance & Risk Services Ltd. in Hamilton, Bermuda, to oversee the disposition of its property. GBG is incorporated in Bermuda and had asked the courts there to appoint a provisional liquidator to help it restructure two months ago. The case has now been converted to a liquidation.
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But for GBG, the handwriting has been on the wall for a while. In July, GBG’s North American arm filed Chapter 11 in New York and sought to sell its assets, which included the successful disposition of both the Aquatalia and Ely & Walker brands.
Bidding and auction processes for the Sean John, Juniper and Air Brands are ongoing and expected to close before the end of this month, GBG said. Reports indicate that both Sean “Diddy” Combs, founder of the Sean John brand, as well as Jeff Tweedy, its longtime president, are interested in rescuing the brand, but they are not working together. A spokesperson for Sean John said the company could not comment, and Tweedy, who exited the brand earlier this year, did not return calls.
Even if the sale is completed, it isn’t enough to rescue GBG, which has slowly been sinking for months. In October, the company’s German subsidiary filed for insolvency, followed on Nov. 1 by the U.K. division. On Nov. 2, it sold its Fiorelli brand for just over $3 million to Centric Brands International Europe Limited and said it would use the funds to pay the expenses of the U.K. administration fees.
But despite its best efforts, GBG was unable to “garner the requisite level of support” from its lenders to implement a restructuring plan that “would be commercially acceptable to the prospective investors.” The company “continues to experience severe lack of liquidity,” leaving it with no choice but to continue to wind down its business, it said Monday.
GBG said that as a result of its liabilities, which exceed the net realizable value of its assets, “it is unlikely that there will be any distribution to the company’s shareholders.”
After many delays, the company finally revealed its consolidated profit and loss, which showed sales of $173 million for the six months ended Sept. 30, 2020, down 40.2 percent from the same period a year prior. The operating loss for the six months was $99 million compared with a loss of $69 million the year before, a drop of 43.6 percent.
For the year ended March 31, 2021, it posted revenue of $725 million, down from $1 billion the prior year and an operating loss of $222.7 million, compared to an operating loss of $95.6 million the year before.
Global Brands Group owns and licenses a wide variety of brands including Sean John, David Beckham, Le Tigre and others. There are two pending lawsuits by Sean “Diddy” Combs, founder of Sean John, against the U.S. division, which are believed to still be pending.
In London, a spokesperson for David Beckham Ventures Ltd. declined to comment on the wind-down of GBG. However, according to sources, DBVL is in the process of buying GBG’s 51 percent stake in Seven Global and taking full control of the company. That process is ongoing and not impacted by GBG’s going out of business.
As reported over the summer, the purchase of GBG’s 51 percent stake in Seven Global could cost DBVL around $40 million, and industry sources told WWD the money would be well spent. At the time, those sources speculated that a divorce was on the horizon, with DBVL keen to take full control of Seven as part of a wider strategy to consolidate all of the David Beckham licenses, brands and partnerships under one roof.
The Seven Global portfolio includes Beckham’s deals with Tudor, Coty, Adidas and Biotherm. Until now, DBVL has been managing the partnerships, activations and marketing directly, with GBG overseeing the finances.
The Beckham portfolio is a broad one and Beckham has been keen to take charge of his businesses. In 2019, Beckham set up an independent, eponymous brand following an amicable separation from former business partners, XIX Entertainment.
Global Brands Group was created in 2005 when Li & Fung established a wholesale business focusing on private label and branded apparel. It owned and operated brands in men’s and women’s fashion, footwear and accessories, and children’s wear. In 2016, it created a joint venture with Creative Artists Agency’s brand management division. In addition to David Beckham, it also manages brands including Coca-Cola and Crayola, according to its website.
