BUGLE BOY DEBT SURPASSES $100M
Byline: Kristi Ellis
LOS ANGELES — Bugle Boy Industries, which filed for Chapter 11 bankruptcy protection Thursday, has most likely played its final note.
Struggling under a heavy debt load and liquidity problems, Bugle Boy is expected to sell its trademarks and liquidate its 216 retail and factory outlet stores, according to Robert Ezra, an attorney with the Encino, Calif.-based law firm Ezra Brutzkus Gubner, which represents 10 Turkish manufacturers owed over $2 million by Bugle Boy.
The company’s largest secured creditors, which are a syndicate led by Foothill Capital and General Electric Credit Corp., are owed about $75 million, according to court papers. Unsecured trade credit is about $30 million.
Among the top five creditors are: Nien Hsing Textile Co., based in Taipei and owed $11.2 million; Chao Hsing Textile Co., also in Taipei and owed $1.9 million; SMS Tekstil Urunleri San, Ve, based in Turkey and owed $1.65 million; and Brighten Garment Ltd., based in Hong Kong and owed $1.6 million.
As reported, William Mow, the company’s founder, chairman and chief executive officer, has left the company. The company has appointed Kenneth Henry of accounting firm BDO Seidman, as the interim chief executive, according to court papers.
In its emergency bankruptcy petition, Bugle Boy also asked for court approval to make a payroll of approximately $1.8 million for 3,796 employees, many of whom have reportedly been laid off.
The company’s move toward private label merchandise, expansion into full retail stores in malls and the closure and consolidation of some of its largest retail customers contributed to the liquidity crisis, according to court papers.
“Those expansion efforts [into malls] have burdened the debtor with significantly increased operating and administrative expenses and have diverted its focus and resources away from its historical core business,” the petition stated. “All of these factors have contributed to what has become an ongoing liquidity crisis for the company over the past several months.”
There are at least two top contenders to purchase the trademarks, according to industry sources, many of whom claim that the company devalued the brand by opening up outlet stores and selling to discounters.
Founded as a better young men’s resource in 1977 by Mow with Vincent Nesi and Stanley Buchtal, the company hit its stride in the early Eighties when, under Nesi’s supervision, it began to focus on moderately priced fashion bottoms for the young men’s and later the boys’ market. In the Eighties, Bugle Boy built its name on parachute pants, which earned it a place on the vendor rosters of most major department and specialty stores.
Even after parachute pants went out of fashion in the mid-Eighties, the company was able to sustain and improve its relationship with stores.
Its introduction of jeans accompanied by an often-quoted, “Are those Bugle Boy jeans you’re wearing?” ad campaign, pushed its sales past the $500 million mark by 1990.
In the Nineties, it built its outlet store organization into one of the largest — 317 stores at its peak — without national advertising. The company maintained strong brand awareness, but it lost touch with young fashion customers and never regained their confidence.
The company had recently been making inroads into women’s with a license for juniors and a family-oriented marketing campaign. Women’s wear accounts for about 10 percent of the company’s volume at wholesale and up to 20 percent of retail sales at Bugle Boy stores.
In January, the company announced that it had signed a licensing deal with One clothing for girls’ and juniors. Under the name B “Heart” B by Bugle Boy, One Clothing launched the young women’s line at the WWDMAGIC show in Las Vegas last February and the line hit stores in June.
Peter Yoo, president of One Clothing, claimed that he will present the fall lines at WWDMAGIC this month in order to fulfill contractual obligations.