MILAN — Roberto Cavalli’s restructuring plan with creditors is only the first step in a number of measures the Florence-based company is setting in motion to overcome its financial troubles. And these measures involve some additional cost cuts, according to the papers filed to the Court of Milan this week.
In addition to ending the relationship with 12 collaborators and consultants in marketing and style, saving 700,000 euros, and choosing internally a successor to creative director Paul Surridge, who exited the brand last month, the company plans to close a number of nonstrategic or nonperforming stores, saving 500,000 euros annually; to reduce investments in marketing or new openings, including the interruption of marketing contributions for 20 million euros to foreign Cavalli companies, such as Art Fashion Corp. in the U.S. which is filing for Chapter 7; Roberto Cavalli Asia Pacific Ltd.; Roberto Cavalli (Beijing) Trade and Commerce Co. Ltd.; Roberto Cavalli Macau Ltd. and Roberto Cavalli Sloane Street Ltd. and to talk to unions to start the procedure for a cassa integrazione for employees, similar to a wage-support measure, by the end of May 2019.
The papers also revealed that the company with AlixPartners requested 47 million euros, net of other cost-saving measures, of its majority shareholder, Clessidra SGR, which did not approve the amount. As reported, Clessidra has reached the limit of investments it can channel into the company as per its statute.
In the filing, Roberto Cavalli SpA has requested 120 days to prepare the restructuring plan and to allow the company to continue to evaluate potential new expressions of interest in buying the brand.
The paper stated that the fall 2018 collection “did not perform as expected,” and that the company saw a contraction in orders from Russia, the U.S., Asia and the Middle East. There is also a mention of a digital platform that was not competitive until in September.
In 2018, “conversely to expectations, the trend of reduction of losses did not continue. On May 11, 2018, the board examined the results from the main sales channels, retail and wholesale, as of March 31, 2018, and recognized that they were lower compared to the same period in 2017.”
According to the filing, the management expected an injection of 65.9 million euros through the approval of the 2019-23 plan. However, this was “suspended” in light of the company’s “financial tension,” which required a “revised budget for 2019” as the company expected a sale by the end of January or early February.
Rothschild, the adviser tapped to find a buyer, contacted 80 potential investors beginning in September 2018 — of which 26 showed interest — continued the filing. Of these, nine confirmed an interest in December. In the end, as reported, Bluestar Alliance, Renzo Rosso’s OTB and Philipp Plein were in the running.
It was also revealed that in February, Rothschild negotiated with other investors who showed interest in the acquisition: Style Capital SGR SpA (which has a stake in MSGM), J- Hirsch & Co. Management and Consulting Srl/Springwater Capital LLC, which were willing to buy 70 percent of Cavalli through a recapitalization; Marquee Brands with English fund OpCapita LLP, and Interparfums Inc., which showed interest in acquiring the brand’s perfume label for 44 million euros, but this meant reaching an agreement with licensee Coty Geneva SA.
Bluestar Alliance offered 5 million euros for 100 percent of the company and new resources for 105 million euros through the acquisition of the brands in North America, the sales of its perfume brand to Interparfums Inc. for 40 million euros and a capital increase of 30 million euros underwritten entirely by Bluestar. The offer was changed subordinating the closing, expected by mid-April, to the restructuring and offering to buy the beauty brand with an earn-out in favor of the partners in case the sale did not go through in the following 12 months. The board approved the offer, but after the due diligence on March 20, Bluestar saw critical issues tied to the structure of the operation and in particular to the transfer of the brands. After that, it was “available to evaluate an acquisition of the business also within a debt-restructuring agreement.”
Staff International, under the OTB umbrella is Just Cavalli’s licensee, and its parent company presented an expression of interest with a recapitalization of 164 million euros. In the end, the group declared its availability “under certain conditions” if Cavalli filed a restructuring plan with creditors.
Philipp Plein Holding AG, partnering with Luxembourg-based Blue Skye Financial Partners Sarl agreed to a nonbinding memorandum of understanding that contemplated 90 million euros offered by a new company to relaunch the brand and finalize the acquisition for 27 million euros through the new company. Similarly to OTB, after “an intense activity of due diligence,” Philipp Plein and Blue Skye announced they would continue with the operation only if Cavalli filed the restructuring plan.
No binding agreement has yet been inked, concluded the papers.
According to a market source, however, Bluestar Alliance “is moving quickly and has had initial conversations with licensees to cover key categories, from handbags and footwear to jewels and apparel” to rebuild Cavalli’s business. Also, the source said the group “has re-engaged Roberto Cavalli [the designer] to reconnect him to the brand in a meaningful way,” with the idea of flanking him to a creative director. On the other hand, other sources contend the designer has not shown interest in returning to the brand he founded and, to be sure, he has not been vocal on the company’s situation.
The filing stated that the first signs of Roberto Cavalli troubles began in 2014, with the company posting a loss of 12.2 million euros, due to credits for 9.9 million euros that were owed to Cavalli by two companies that were also in the midst of a restructuring plan with creditors. While the papers do not mention Ittierre, a longtime Cavalli licensee, the company was hard hit by that company’s parent IT Holding going into administration in 2009 after filing for bankruptcy protection under the Italian equivalent of Chapter 11. In December 2014, Just Cavalli’s innerwear and swimwear licensee Albisetti SpA also went bankrupt.
The papers noted a crisis in 2015 and 2016, when Cavalli’s collections did not perform well in Russia, which was then a strong market for the brand.