By  on April 5, 2010

Rock & Republic hopes its Chapter 11 bankruptcy filing last week will allow it to find a new investor to pay off a $15 million loan without disrupting its operations.

The avant-garde premium denim brand for women and men, based in Culver City, Calif., filed for bankruptcy court protection in Manhattan on Thursday night for strategic reasons, Geoffrey D. Lurie, who’s been appointed chief restructuring officer of the firm, told WWD Friday.

“This was a strategic filing to stabilize and put more balance into the debt structure,” he said. “We call this a balance-sheet filing and not an income-statement filing.” According to Lurie, Rock & Republic has a stable business that generated about $100 million in wholesale volume last year and is expected to do about the same this year.

However, it also has — and is currently unable to repay — a $15 million loan, plus interest, owed to secured creditor Richard Koral, who sells overstock to outlets and is the brother of Seven For All Mankind founder Peter Koral. The collateral for the loan, according to court papers, was the firm’s intellectual property, valued at $50 million.

Lurie’s affidavit to the court said the filing was necessary to prevent “Koral from taking any action” on the debtor’s IP assets after Friday. Lurie said the firm’s intention is to find a replacement lender for the Koral loan and that it’s in discussions “with a significant number of strong financial sources interested in investing in the company.”

The bankruptcy filing, he noted, gives the company time to negotiate the best deal available. Without specifying the names of potential investors, he said they include hedge funds, private equity firms and strategic partners.

Lurie expects no interruptions in the business due to the filing. The firm shortly plans to begin shipping fall orders and taking orders for spring 2011.

Rock & Republic is sold in upscale department stores such as Neiman Marcus, Nordstrom, Saks Fifth Avenue, Bergdorf Goodman, Bloomingdale’s and Harrods, as well as in specialty stores and its own three freestanding locations. Those sites are its flagship on Robertson Boulevard in Los Angeles and two outlets in California, one in Cabazon and the other in Camarillo.

In the court papers, the company indicated it had between 200 and 999 creditors, and estimated its total assets at between $50 million and $100 million and total liabilities between $10 million and $50 million. It is seeking bankruptcy court approval of a debtor-in-possession financing facility of up to $7.5 million from CIT Group/Commercial Services Inc.

In addition to the recent hiring of Lurie, the firm retained Marvin Traub Associates Inc. as strategic adviser and Atlas Strategic Advisors as its investment adviser.

Michael Ball, who founded the edgy brand in 2002, continues as chief executive officer and creative director and will focus on product development. Despite taking a generally “business as usual” approach, Lurie is planning on doing some “spring cleaning” on the operations side of the business. For now the focus will be its core products in apparel and footwear for men, women and children. All of the manufacturing is done in-house, and Lurie will need to explore whether it makes more sense to outsource some of the work as well as determine which licensing opportunities to pursue.

In addition to cutting back on employee headcount and dropping sports sponsorships and its New York fashion show, last year the company started a lower-priced Recession Collection. Lurie didn’t rule out the possibility of continuing with the label or working on similar projects as the firm fine-tunes its offerings.

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