Nasty Gal Melrose Avenue

Nasty Gal’s committee of unsecured creditors is looking to flex its muscle in the potential sale of the Los Angeles digital brand.

The group filed a limited objection in bankruptcy court, meaning that while the committee is not pushing back on a potential sale to Manchester fast-fashion e-tailer Boohoo plc, it wants a seat at the table and certain terms written into the purchase agreement that would protect the value of the Nasty Gal estate should a deal fall through.

Boohoo, which recently closed on its purchase of fast fashion e-tailer PrettyLittleThing, said in December it offered $20 million for Nasty Gal’s intellectual property. The offer would make Boohoo the stalking horse bidder in a bankruptcy auction of the company. Nasty Gal filed for bankruptcy in November after struggling to find a buyer amid operational challenges, which hampered the company’s business performance as it was unable to keep in step with its own rapid growth.

The purchase agreement struck with Boohoo raised the ire of the unsecured creditors committee, which pointed out its lack of any role in the evaluation of bids, discussions with Boohoo or the creation of the asset purchase agreement.

“Thus, while it appears that the committee will be allowed to witness the sale process and proceedings, unless the process is modified, the committee will be relegated to sitting in the bleachers with no binoculars,” the committee’s objection said.

The committee’s specifically asking for a seat at the table in the bid-auction process. It wants to be consulted in all decisions related to the sale process. If the two sides are unable to come to agreement, the committee believes its position should prevail. The committee is also asking for more stringent protections as it relates to payment of a breakup fee in the event of a sale not going through.