LONDON — Having once aspired to be China’s very own LVMH Moët Hennessy Louis Vuitton, the debt-laden Shandong Ruyi is fighting for survival, with some of its prized assets likely to change hands in 2022 — some of them more quickly than others.
With billions in debt, Ruyi has been looking to offload Savile Row tailor Gieves & Hawkes, the Italian men’s wear brand Cerruti, and the French contemporary fashion group SMCP, owner of the Sandro, Maje, Claudie Pierlot, and De Fursac brands. SMCP, in particular, is proving to be problematic.
On Monday, Trinity Limited, Ruyi’s men’s wear unit that includes Gieves & Hawkes, Kent & Curwen and Cerutti, has been put into liquidation, according to the company’s filings with the Hong Kong Stock Exchange.
The company said liquidators FTI Consulting and R&H Services have been appointed to assess the financial position of the group and to consider the opportunity of a possible restructuring.
While these brands may face permanent closure, a rescue deal could still be struck for Gieves & Hawkes’ brand name, while the tailor’s archive collection could be sold off at auction to collectors of historic artifacts.
It’s understood that Marks & Spencer, which bought Jaeger out of insolvency last year and has been adding third-party brands to its growing online platform, is still exploring how it could incorporate Gieves & Hawkes into its business.
M&S has a strong tailored clothing offer, and has long worked with Savile Row tailor Richard James to design one of its in-house men’s clothing collections.
The other potential buyer is entrepreneur Touker Suleyman, owner of high street tailoring brand Hawes & Curtis, women’s wear label Ghost, and several clothing factories in Turkey, Bulgaria and Georgia, in the former Soviet Union, according to market reports.
It remains unclear what will happen next to Cerruti, which Ruyi acquired when it took a majority stake in Trinity Group in 2017. Since the departure of its chief creative officer Jason Basmajian in 2019, the brand has gone off the radar, and is understood to have rebuffed a series of offers from interested parties.
Ruyi’s financial woes have also caused companies in its portfolio, like Israeli men’s wear brand Bagir and Japanese apparel firm Renown, to file for bankruptcy protection in 2020. British trenchcoat-maker Aquascutum, another of its brands, has ceased trading in the U.K. after closing its Regent Street flagship during the pandemic.
With an ambition to become a fashion leader, Shandong Ruyi embarked on a global shopping spree in 2015. In 2016, it bought SMCP from private equity firm KKR, and Trinity Group from Li & Fung. It also purchased Aquascutum that same year.
At the time, Ruyi’s president Yafu Qiu called the acquisition of SMCP a “significant step” in its ambition to become a “leader in the fully integrated textiles and fashion business both in China and globally.”
He said he would help SMCP achieve its “long-term objective of becoming a global leader in accessible luxury.”
Faced with mounting debts, Ruyi has seen its credit rating downgraded several times by Moody’s.
In June 2020, the struggling group also lost its key backer. The state-owned Jining City Urban Construction Investment Co. Ltd., which promised Ruyi Group a 3.5 billion renminbi, or $495 million, investment, walked away. The investment was supposed to provide a much-needed cash injection and an endorsement from the local government.
Ruyi also suffered from China’s crackdown on overborrowing to fund overseas expansion. Since 2017, Beijing has been curbing Chinese companies’ overseas shopping sprees to a new seven-year low in 2021.
While it may well find buyers for Gieves & Hawkes and Cerruti, Ruyi might take longer to sell the publicly quoted SMCP due to an ongoing battle with the company’s institutional shareholders.
In October, Ruyi’s Luxembourg-based European TopSoho defaulted on 250 million euros worth of bonds, igniting the ire of shareholders like Blackrock and Carlyle, which have united under the name of Glas. It owns a 29 percent stake in SMCP and 25 percent of its voting rights following the default.
Glas has accused Ruyi of shady dealings in shares, and has demanded that SMCP hold a board meeting in January and remove all board members linked to Ruyi, including the founding Qiu family.
Ruyi, meanwhile, denies any illegal share dealings and has accused Glas of “malicious attacks” on the company, illegally profiting from SMCP, violating professional ethics and operating in secret.
The legal battle between the two is expected to continue into 2022 and beyond. But if a deal is reached and Glas takes control, it is very likely that Glas will sell its collective stake to a potential buyer.