Another Retailer Files For Bankruptcy: Centric Brands Files Chapter 11

[Correction: A previous version of this article incorrectly stated that Tommy Hilfiger and Calvin Klein filed for bankruptcy.]

Centric Brands (CTRC) filed for Chapter 11 bankruptcy protection on Monday. The company will restructure and has entered into an agreement with virtually all of its lenders, where is will receive $435 million in debtor-in-possession (DIP) financing led by Blackstone, Ares Management Corporation, and HPS Investment Partners to “recapitalize the company,” allowing it to continue to operate without interruption.

Centric Brands said it expects a “timely emergence” from bankruptcy that will reduce about $700 million in debt and allow the company to become privately owned by its lenders. The retailer anticipates through the DIP financing that it will continue to meet its obligations to employees, licensors, suppliers, and vendors.

Through the restructuring agreement, investment firm Blackstone will take an equity interest in Centric Brands and assume its second lien debt. The company’s stock will be extinguished once the restructuring agreement has been consummated.

Centric Brands, which employees about 4,000 workers, said the company’s ability to reopen locations will not be impacted by the Chapter 11 filing. The company designs and sells apparel and accessories under 100 brands, including Calvin Klein, Tommy Hilfiger, Nautica, Under Armour, Kate Spade, Michael Kors, Timberland, Spyder, and Jessica Simpson. The company also owns the Hudson, Robert Graham, Swims, Zac Posen, and Avirex brands.

“Today’s agreement marks the beginning of our next chapter as an even stronger company and builds upon our progress to date executing on our long-term strategy,” Jason Rabin, CEO of Centric Brands, said in a statement. “I am honored that Centric Brands’ lender group has such strong confidence in our team. Their partnership and support will enhance our ability to continue to grow our business, providing best-in-class design with an unmatched sourcing network, retail partnerships, industry expertise, and deep relationships with licensors.”

“The current crisis has significantly impacted companies across all sectors,” Jason Rabin, CEO of Centric Brands, said in a statement. “The pandemic disrupted many of our wholesale accounts’ ordering and constrained our cash flow. However, we are confident that with added flexibility in our capital structure, we will be well-positioned for long-term success during this period and beyond.

“We thoroughly evaluated all possible strategic options to address this environment. After extensive review, we determined that partnering with our current lenders to pursue this path will result in a stronger financial position and more resources to support future growth, while allowing us to focus on serving key stakeholders,” he added.

The company has hired Ropes & Gray LLP, Dechert LLP, PJT Partners, Inc., and Alvarez & Marsal as its legal, financial, and restructuring advisors.

Centric Brand joins retailers J. Crew, Neiman Marcus, and JC Penney in filing bankruptcy since the coronavirus pandemic started.

Shares of Centric Brands stock were down 55.46% as of 3:26 p.m. EDT on Monday.