U.S.-based subsidiaries Agent Provocateur Inc. and Agent Provocateur LLC earlier this week filed for Chapter 11 in New York, little more than a month after brand parent Agent Provocateur Ltd. was pulled out of administration in England through a purchase by Four Holdings, a fashion showroom and marketing company controlled by Ashley.
That sale did not include any rights to subsidiary assets however, according to a court declaration from Agent Provocateur’s London-based global retail director Amanda Brooks, who said the subsidiaries were set to file for a Chapter 7 liquidation.
Instead, an affiliate of Four Holdings has “expressed an interest” in purchasing 12 retail locations in the U.S. and continued in March to fund operations and ship merchandise to the stores. But now, landlords are “closing in” and the U.S. operations are “imperiled and their business has deteriorated,” according to Brooks.
“Terminations are imminent at a couple of these locations; in fact, one landlord is about to evict one of the debtors from a prime location,” Brooks went on. “These actions have forced the debtors to file Chapter 11 petitions in order to stave off any lease terminations or evictions relating to these locations.”
The Four Holdings affiliate set to buy the U.S. locations has agreed to fund certain operations “to the extent necessary” during the bankruptcy process, while acting as the stalking horse bidder for the 12 stores, according to court documents.
“This course of action is critical to maximizing recoveries for the debtors’ creditors and preserving the employment of many of the debtors’ employees,” Brooks said.
The subsidiaries’ largest debts include about $700,000 owed for U.S. customs duties and more than $280,000 owed for use of brand intellectual property owned by the Agent Provocateur parent company. A majority of its debts are owed to landlords.
While Chapter 11 sales are subject to a court-monitored auction in an effort to lure higher and better offers, the Agent Provocateur subsidiaries are asking that the sale process be expedited.
Total liabilities for the brand in the U.S. fall between $10 million and $50 million, and assets are only between $1 million and $10 million, according to court documents.
As for what led to the brand’s financial difficulties, Brooks mentioned the discovery last August of “certain accounting irregularities” which showed the Agent Provocateur parent was in dire need of “significant additional capital.”
Private equity firm 3i, which acquired a controlling stake in the brand in 2007, subsequently began searching for a buyer and wrote down the value of its investment by 39 million pounds, or $53 million.
Agent Provocateur representatives could not be reached for comment.
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