Questions continue to grow concerning the future of Global Brands Group. The North American company has issued a warning about continuing as a going concern and is looking to sell off its brands, according to industry sources.
Sources said two of the biggest licensed brands, Spyder and Frye, have transitioned back to their owner, Authentic Brands Group, and are in the process of being reassigned to new licensees. That process is expected to be quick since the brands are garnering a lot of interest from potential partners, sources said.
In addition to Frye and Spyder, other licensed brands under the GBG umbrella include Ellen Tracy, All Saints and Sean John. Its directly owned brands include Aquatalia and Ely & Walker. As reported, in February, Sean John founder Sean “Diddy” Combs filed two separate lawsuits against GBG in New York seeking $25 million for “false endorsement, misappropriation of likeness and violating his publicity rights,” over the launch last fall of a women’s collection with U.K. fast-fashion retailer Missguided Unlimited. The second suit was brought by Combs’ nonprofit Citizen Change over the GBG entities’ use of the phrase “Vote or Die,” the trademark for which is owned by Citizen Change and another company run by Combs called CE Trademark, according to the complaint. Both suits are ongoing.
Sources indicated that GBG in North America could potentially look to file for Chapter 11 bankruptcy as soon as the end of next week, and might look to auction off all the assets. Various operating companies are evaluating becoming a stalking horse bidder.
Ducera Partners, a boutique investment bank, is leading the process, along with Ancora. David Skatoff, a partner at Ducera Partners, couldn’t be reached for comment.
Rick Darling, chief executive officer of Global Brands Group Holding Ltd., also couldn’t be reached Wednesday for comment.
As reported, last month, GBG completed the sale of its Spyder business to a Korean investor group netting $19.5 million. The net proceeds aren’t going to be used to repay the group’s existing bank debt as originally considered. Rather, the group said it would seek consent of the lenders for future withdrawals to fund the group’s operations, GBG said. At that time GBG issued a warning to investors that there were questions over its ability to continue as a going concern.
Global Brands Group was originally created in 2005 as a division of Li & Fung to manage private label brands. It was subsequently spun off and listed on the Hong Kong Stock Exchange in 2014. Later that year, it formed a joint venture with David Beckham to develop Seven Global to manage the Beckham brand across various categories. The Beckham business is believed to be under the management of the Hong Kong company, which is healthy, and wouldn’t be part of any North American bankruptcy filing. In 2016, GBG formed a partnership with Katy Perry to develop an eponymous footwear collection.
GBG’s biggest asset is CAA-GBG, a business in which GBG owns the majority stake, but sources said that won’t be part of any potential North American bankruptcy filing, and is operated separately. CAA-GBG is the world’s leading brand management agency formed through a joint venture with Creative Artists Agency and GBG. They partner with their clients to expand their intellectual property into new consumer product categories, experiences and territories.
While sources said the Hong Kong parent would be able to avoid bankruptcy, it has said publicly that its accumulated debt has been its biggest source of pain.
Last month, GBG chairman William Fung said the company’s liabilities exceeded its assets by $899 million at the end of September. Trade payables to external creditors and related companies, which have become past due, along with accrued interest, were $851 million and the company was in breach of its financial covenants relating to a syndicated loan of $174 million.
“Certain conditions, including those described above, indicate the existence of material uncertainties which may cast significant doubt about the group’s ability to continue as a going concern,” the company said. Last month, Fung said the company’s board was considering various debt-restructuring options such as a potential sale or disposal or restructuring of assets within the group in order to reduce its indebtedness and to ensure that the group has a sustainable balance sheet in the long term.
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