NEW YORK — Rock & Republic, the premium denim company that filed for bankruptcy protection April 1, appears to be drumming up some interest among investors.
This story first appeared in the April 16, 2010 issue of WWD. Subscribe Today.
“Essentially there’s a lot of interest from strategic and financial partners,” said Geoffrey D. Lurie, who was hired this month as chief restructuring officer at the Culver City, Calif.-based denim firm. “All options are open.” He said Michael Ball, the company’s chief executive officer, would be interested in continuing the growth with a financial partner, “but if [a strategic partner] came along with a significant offer, we’d listen to them.”
Marvin Traub, president of Marvin Traub Associates, who was hired as a strategic adviser for the brand, was spotted this week having lunch with Michael Kramer, ceo of the Kellwood Co., at the Harvard Club.
“Mike [Kramer] is very aggressive in building the Kellwood business, and we were talking broadly about business,” said Traub. He said there are many candidates who have shown interest, especially since the brand has both a women’s and men’s presence. “It has a personality and a niche of its own,” said Traub. Atlas Strategic Advisors is acting as the investment adviser. Officials at Atlas Advisors didn’t return a phone call seeking comment. Kellwood’s Kramer also had no comment.
Another company said to be interested is Windsong Brands LLC. William Sweedler, ceo of Windsong Brands, whose brands include Ellen Tracy, Carlos Falchi and Caribbean Joe, couldn’t be reached for comment.
Hilco Consumer Capital is also said to be mulling an offer. A spokesman for Hilco said, “We typically do not disclose when we are looking at possible acquisition targets so we have no comment.” Spokesmen for Jones Apparel Group and VF Corp. had no comment on whether they’d be interested in acquiring Rock & Republic.
“A lot of people are looking at it, but there are no bites,” said one source.
Asked how quickly a deal could come together with an investor, Traub replied: “There isn’t a deadline. We would all like to move quickly and there’s enough interest to move quickly.”
Lurie said the Rock & Republic business is improving daily. “We had a lot of pent-up orders and we’re catching up and getting these orders executed. I think it will be a quick Chapter 11. We don’t want to languish in Chapter 11 for a long time. There has been significant interest in people willing to invest in the company.”
Lurie said the firm is shipping fall merchandise and taking orders for spring 2011. The company, with a freestanding store on Robertson Boulevard and two outlets in California, plans to open another outlet in Woodbury Commons in Central Valley, N.Y., around Memorial Day, said Lurie.
The priority is to concentrate on the company’s core apparel business and shoes, said Lurie. “We’re slowing the expansion of diffusion lines. The brand is what we need to protect and we need to improve our shipping record in our branded goods. The problem was our senior lender put a crimp in that,” he said.
Sources said several companies took a look at the jeans firm before the bankruptcy filing, but found the asking price to be significantly above what the market would bear. Now, sources said, the longer they wait to sell it, the more value in the brand is lost.
Meanwhile, retailers continue to support the brand.
“Stores have been enormously supportive,” said Traub. “It’s a very good brand that has had its problems. They did take on too much debt, and they’ve had some problems with their deliveries.”
According to a book out on the company, Rock & Republic (which consists of the apparel and retail units) made $3 million in profit on revenues of $97 million last year. In 2008, the company lost $4.4 million on $108 million in sales. This year, the company is on track to do about $100 million in sales and make $10 million in profit, said sources.
In early April, Rock & Republic was unable to pay a $15 million loan, plus interest, owed to secured creditor Richard Koral, who sells overstock to outlets and is the brother of Seven For All Mankind founder Peter Koral. According to court papers, the collateral for the loan was the firm’s intellectual property, valued at $50 million. Richard Koral didn’t return a phone call seeking comment.
As reported, Lurie’s affidavit to the court said the filing was needed to prevent “Koral from taking any action” on the debtor’s IP assets after April 2. At the time, Lurie said the firm’s intention was to find a replacement lender for the Koral loan.
In court papers, the company indicated it had between 200 and 999 creditors, and estimated its total assets between $50 million and $100 million and total liabilities between $10 million and $50 million. It is seeking bankruptcy court approval of a debtor-in-possession financing facility of up to $7.5 million from CIT Group/Commercial Services Inc.