Clothing retailer Lucky Brand Dungarees LLC has filed for bankruptcy with initial plans to close at least 13 stores and with a possible deal to sell its private equity-backed business to the operator of Aéropostale and Nautica brands.
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Debts of the Los Angeles-based business, which is owned by Leonard Green & Partners LP, include $182 million owed to lenders and $79 million to merchandise vendors, according to a filing Friday in U.S. Bankruptcy Court in Wilmington, Del.
SPARC Group LLC is leading a proposed deal to buy the business, according to a declaration filed with the court by Mark A. Renzi, Lucky Brand's restructuring chief. SPARC is an apparel company operating under the Aéropostale and Nautica brands owned by Authentic Brands Group LLC and Simon Property Group, one of Lucky's key landlords, a court filing said.
The offer is subject to better and higher bids and court approval. The bid for Lucky includes $140.1 million in cash and a credit bid of $51.5 million by lenders, a court filing said. It also has a backup bid if that one falls through, a filing said.
This isn't the first time Authentic Brands and Simon have teamed up to take over a troubled retailer. The two firms, along with Brookfield Property Partners, teamed up to buy bankrupt retail chain Forever 21 earlier this year. Authentic Brands and Simon were also part of the group that bought Aéropostale out of bankruptcy about four years ago.
Lucky Brand blamed its financial woes on the shift away from bricks-and-mortar stores to online channels, a highly competitive retail environment, and a move in consumer spending away from apparel to technology. The coronavirus pandemic also has caused a month-over-month decline in revenue of about 50%, it said.
Founded in 1990, Lucky Brand currently has more than 200 North American stores. It didn't rule out closing additional stores beyond the initial 13 it has identified.
The company estimates that its lease expenses will be $52 million in fiscal 2020. Its biggest unsecured creditors include Simon, which is owed more than $4.6 million, a court filing says.
Lucky shareholders also include Carlos Alberini, its former chief executive officer and the current CEO of Guess? Inc. Mr. Alberini left Lucky Brand last year to return to Guess.
Lucky's existing lenders are providing $15.6 million in financing to help the company get through bankruptcy.
Lucky's bankruptcy advisers include law firm Latham & Watkins LLP, consulting firm Berkeley Research Group LLC and investment banker Houlihan Lokey Capital Inc.