BCBG Max Azria Group LLC is inching closer to finding itself in bankruptcy court.
Financial sources said Tuesday that the company has been evaluating its options as it tries to restructure its debt, including the hiring of bankruptcy counsel. Financiers said the process has already moved further into Chapter 11 territory, and one individual said the company is “now shopping for bankruptcy attorneys.”
A spokesman for BCBG declined to comment about the firm shopping for bankruptcy counsel.
BCBG has been struggling with debt for many years but the lackluster retail environment that has been dogging most contemporary brands now has the company facing a cash crunch. After hitting a critical financial juncture in February 2013, the company completed a capital restructuring in February 2015 with a $135 million cash infusion from a group of investors that included Guggenheim Partners and its affiliates. The deal, which restructured BCBG’s debt and strengthened its balance sheet, took two years to get done. Guggenheim had a substantial portion of debt, which was largely converted to equity, although BCBG founder Max Azria and his wife Lubov retained an ownership position.
Fast forward to 2016 when talk in the industry had the brand once again struggling financially, in part due to changing consumer shopping patterns that were hurting most brands in the contemporary space. By the summer, Azria was placed on paid leave, although his daughter Joyce and wife Lubov remained at the company. Fashion consultant Marty Staff was later hired as chief executive officer. Joyce Azria left her post as creative director for the company in August to launch her own contemporary line, called Avec Les Filles. Her stepmother Lubov is still creative director of the BCBG and Hervé Leger brands. The company didn’t show at September’s New York Fashion Week.
Sources in November said the company’s new leadership under Staff was in the process of fixing the business and its underlying operations. BCBG at the time had cut 123 positions at company headquarters in Vernon, Calif. Last month, it was learned that the restructuring plan Staff has been working on included a rationalization of the business’s store fleet – it has more than 570 globally — so it can focus more on the concession model, licensing and the digital world. While closing stores saves money longer-term, restructuring costs — such as severance payments — hurt the bottom line on a short-term basis.
The company is said to be working with consulting firm AlixPartners and, according to Reorg Research, has hired Jefferies as its financial adviser.