INVESTMENT FUNDS BUY BONDHOLDERS’ ESPRIT DEBT

Byline: Lisa Lockwood

NEW YORK — Two investment funds have bought $102 million worth of debt from bondholders of Esprit U.S., the troubled San Francisco junior sportswear company.
Serberus Partners, here, and Oak Tree Capital Management, based in Los Angeles, purchased all of Esprit’s debt, reportedly at a substantial discount.
Esprit is owned by Susie Tompkins and Michael Ying, both of whom were unavailable for comment. However, an Esprit spokesman confirmed the transaction.
“The debt of the company has traded hands. Esprit is discussing alternatives with new lenders to meet the company’s obligations,” he said.
Andrew Cohen, president of Esprit U.S.’s wholesale division, noted, “Ultimately I expect [the investment funds] will be involved in the ownership of the company.” Cohen added that he expects negotiations to restructure Esprit’s debt will be completed by Jan. 1.
Esprit, which has experienced dramatic shifts in its fortunes in the last several years, has wholesale volume estimated at $120 million. That’s down from an estimated peak of $400 million in 1990.
Susie Tompkins bought out the 50 percent share of her ex-husband, Doug Tompkins, in June 1990. According to sources, the buyout contributed heavily to the company’s debt load.
Begun in 1970, Esprit catapulted to the top of the junior sportswear heap with its innovative styling, youthful image and bold ad campaigns, only to fall victim to a shrinking and highly competitive market and major upheavals in management and design direction. The socially conscious company was well known for an employee-friendly corporate culture set against a backdrop of in-fighting.
This year, Susie Tompkins decided to close the contemporary sportswear collection that bore her name, ending its three-year run.
For the last few months, Jay Margolis, former vice chairman of Liz Claiborne Inc., has been talking to Susie Tompkins about getting involved with Esprit. Although Margolis is in the midst of closing a deal with Bain Capital for Ellen Tracy, he’s reportedly still keeping his options open.

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