CREDITORS HIT MOSSIMO WITH CH.7
Byline: Kristi Ellis
LOS ANGELES — Three unsecured creditors of Mossimo Inc., owed a combined $650,000, Tuesday filed an involuntary bankruptcy petition against the company, according to Mark D. Brutzkus, an attorney representing the creditors.
Brutzkus, with the Encino-based firm Ezra Brutzkus Gubner, said that the creditors filed the Chapter 7 liquidation petition in Orange County “out of frustration.” He noted that Mossimo canceled orders with the three companies. Some unpaid orders go back 90 to 120 days, the attorney added. The three Los Angeles-based companies, all packaged products firms, are Pacific Apparel Resources, Wilmar Concepts and Caeco Enterprises.
“We were trying to structure a deal to pay down the debt but [Mossimo representatives] did not put any viable solutions on the table,” Brutzkus explained. “No deal appeared to be forthcoming.”
The bankruptcy petition follows on the heels of a $1 billion licensing deal inked between the troubled Irvine, Calif.-based lifestyle brand and Target Stores. As reported, Mossimo’s three-year licensing agreement with Target will generate a minimum of $27.8 million in royalties for the company.
Based on the combination of minimum sales of $300 million in 2001 and $350 million for the two subsequent years, as well as royalty percentages, Mossimo will receive at least $8.5 million next year and $9.63 million each year for 2002 and 2003, according to a recent Securities and Exchange Commission filing. It is unclear whether the petition will have any impact on the licensing agreement.
When the licensing deal was announced in March, Mossimo said it was seeking financing “to cover anticipated operating shortfalls during the interim period” since royalties from its activities with Target aren’t expected until May 2001.
Mossimo Giannulli, founder and chairman, said Wednesday that he was not aware of the petition and had no comment on its details. Dana Mackie, partner in the workout firm Kershaw Mackie that is helping Mossimo with its restructuring, also declined comment on the filing.
Brutzkus said Mossimo has the option to convert the petition into a voluntary Chapter 11 bankruptcy.
Mossimo reported a first-quarter loss of $9 million compared with $1.6 million a year ago. The loss included $4.1 million in write-downs of property, equipment, lease obligations and severance.