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23/08/2017

A Running List of Fashion Bankruptcies

On the heels of an array of retail bankruptcy filings in 2016, New York-based designer Bibhu Mohapatra and retailers The Limited, Wet Seal, and most recently, Payless, have all filed for Chapter 11 protection this year, signaling that there is no end in sight to the constant string of fashion companies struggling financially.

Some of the most recent retail bankruptcies have been those of the traditional mall retailers, whose businesses have suffered significantly in light of fast fashion's growth. Moreover, market giants, such as Wal-Mart and Target have wiped out a number of other companies, who were unable to compete with their pricing power and general reach. And as noted by many sources, any existing retail problems only increased when Amazon arrived on the scene.

For the uninitiated, Chapter 11 bankruptcy – one of the most commonly utilized forms of bankruptcy – allows a company to continue operating while it executes a reorganization plan. Chapter 11 can take a number of forms, but in short: A chapter 11 case begins with the filing of a petition with the bankruptcy court by the debtor (the entity that owes the debt – aka the retailers in the cases at hand). This is followed by the debtor proposing and executing a reorganization plan, which may be used to compromise or even eliminate certain classes of debt.

All the while, the debtor usually remains in possession of his assets and continues to operate any business, subject to the oversight of the court and the creditors committee. Typically, a company that has filed for Chapter 11 bankruptcy trying to stay in business, and as indicated below, this complex proceeding can be very effective in solving short term business problems in an otherwise viable company or winding down a company with valuable assets.

Retail Bankruptcies

Here is a look at some of the most recent retail-related filings, as well as some significant ones dating back a bit further.

July 2017 - Alfred Angelo

The major bridal dress chain abruptly closed an array of its stores in July leaving brides and bridesmaids dress-less, panicked, and in limbo. Alfred Angelo – a Florida-based company that stocks at nearly 1,400 boutiques across the U.S. and internationally, including self-owned and operates stores in Los Angeles, New York, Chicago, Miami, and D.C. – has since confirmed the store closures and that it has filed for bankruptcy protection.

July 2017 - True Religion

U.S. denim retailer True Religion Apparel confirmed that it has filed for bankruptcy protection and signed a restructuring agreement with a majority of its lenders. True Religion, a company whose denims have gradually fallen out of style, filed for creditor protection under Chapter 11 in the U.S. bankruptcy court in the District of Delaware, and listed assets and liabilities in the range of $100 million to $500 million.

June 2017 - Papaya Clothing

Teen apparel seller Papaya Clothing has filed for Chapter 11 bankruptcy protection. The privately held California-based company, which maintains a network of 80 brick-and-mortar stores and about 1,300 employees, said in its filing that its financial difficulties came from competition from e-commerce and a poorly timed expansion, according to the Wall Street Journal. Opening its first store in 1999, Papaya added about 50 new stores in the last six years. The expansion took “a heavy financial toll” and significantly increased operating expenses, court papers stated.

May 2017 – Rue21

U.S. teen fashion retailer Rue21 Inc filed for Chapter 11 protection on Monday in the Western District of Pennsylvania bankruptcy court.The retail chain, which sells budget-priced clothing and accessories at over 1,100 stores across the United States, listed assets and liabilities in the range of $1 billion and $10 billion, according to the court filing.

April 2017 – Jaeger

British brand Jaeger has gone into administration, following confirmation from the brand it filed a notice of intention to appoint administrators. According to the BBC, Jaeger, which was founded in 1884 and has counted actresses and Kate Middleton among its fans, has struggled to keep up with rivals, such as Burberry, or see off competition from fast-fashion chains including Zara and H&M.

April 2017 – Payless, Inc

Payless filed for Chapter 11 bankruptcy in St. Louis, listing liabilities of $1 billion to $10 billion and citing a plan to immediately close about 400 underperforming stores in the U.S. and Puerto Rico. “This is a difficult, but necessary, decision driven by the continued challenges of the retail environment, which will only intensify,” Chief Executive Officer W. Paul Jones said in a statement.

March 2017 – BCBG Max Azria

BCBG, a venerated contemporary brand, which has been a major force in the Los Angeles fashion industry for nearly 30 years, filed for bankruptcy in a third attempt in two years to rescue the business hit hard by changing consumer habits. According to its bankruptcy filing, BCBG is rejecting a number of store leases and closing 120 unprofitable stores that racked up $10 million in losses during fiscal 2016. These stores made up 63 percent of BCBG’s total losses from retail locations with negative contribution margins, the company said in U.S. Bankruptcy Court filings in New York.

Some lenders have agreed to loan the company $45 million to help it get through bankruptcy. That loan must be approved by the judge in the case. BCBG owes lenders about $459 million.

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