Dive Brief:
- Sequential Brands Group filed for Chapter 11 bankruptcy protection Tuesday after the company determined that "it was no longer able to operate its portfolio of brands" because of its debt load, according to a press release.
- Sequential is looking to sell most or all of its assets through a court-supervised auction while in bankruptcy.
- The company has secured $150 million in debtor-in-possession financing from existing term lenders to fund its operations through the Chapter 11 process.
Dive Insight:
Sequential Brands — which owns the Jessica Simpson, Joe's Jeans, And1, Avia and other brands — has been in turmoil for more than a year. It has missed reporting deadlines, churned through executives and sold off assets to pay back lenders, who have given the company leeway after it breached loan covenants. And it has repeatedly issued warnings to investors that it might not survive as a going concern.
Since last October, Sequential lost a CEO, a senior vice president of finance and an executive chairman. After one of its lenders, Wilmington Trust, gained the right to appoint a majority of Sequential Brands' board, four board members resigned. The exodus included Martha Stewart, whose namesake brand Sequential sold in 2019 to Marquee Brands.
The company's performance made it tough if not impossible to pay down debt, which stood at more than $450 million at the end of 2020. Revenue last year fell by nearly 12% while operating losses hit $45.1 million.
Trying to stay afloat and pay back lenders, Sequential has been holding a standing fire sale. In August, the company announced it had sold the Ellen Tracy and Caribbean Joe brand assets for a combined $20 million, roughly a third of what it paid for the brands in 2013.
Sequential has also sold the Heeling Sports brand for $11 million to BBC International. Jessica Simpson, whose eponymous brand is one of the largest in Sequential's portfolio, has also reportedly been looking into buying it back from Sequential.
According to company Chief Financial Officer Lorraine DiSanto, Sequential has been exploring possible asset sales for nearly two years. The company launched a broader sale process in early March 2020, reaching out to more than 90 parties and signing nondisclosure agreements with around 30 prospective buyers. But the pandemic's massive disruption, which started in force later that month, derailed those plans, DiSanto said in court papers.
The process continued, though. On filing for bankruptcy, Sequential landed a stalking horse bid from Galaxy Universal for its Active Division assets, as well as from Centric Brands for the Joe's Jeans brand.
As part of its restructuring agreement with lenders, Sequential is looking to hold an auction and close on a sale of its assets by 75 days after filing.
