The coronavirus shutdown proved to be too much for J. Hilburn, the Dallas-based direct seller of made-to-measure men’s wear, which filed for Chapter 11 bankruptcy, but came into court with a plan to be taken over by its largest creditor.
The company arranged for debtor-in-possession financing from its largest trade vendor, Hong Kong-based TAL Global Alliances, according to the filing last week.
It has 41 employees, with 10 on furlough, and operates four showrooms in Dallas, New York City, Boston and Bellevue, Wash. It also contracts with some 1,800 stylists who visit customers’ homes for fittings and styling advice.
In the firm’s first-day declaration filed in Texas Northern District bankruptcy court, Dave DeFeo, who was named chief executive officer of the company in July, attributed the filing to the effects of the coronavirus pandemic. “Since early March, and coinciding with the exponential spread of COVID-19 in the United States, the [company’s] daily sales volume has dropped precipitously,” the paperwork reads. In March, daily sales fell by approximately 53 percent compared with a year earlier, with a 74 percent reduction in the last two weeks of the month. April sales were down 63 percent. This resulted in “immediate liquidity constraints” that impaired the company’s ability to meet its payroll and critical vendor payments.
Although the company believes its “core business model is sound and expects that sales volume will increase as the COVID-19 pandemic recedes, the substantial uncertainty regarding the length of the pandemic and its lasting economic effects make a prompt return to pre-pandemic sales levels unlikely,” the company said.
TAL has agreed to fund a recapitalization and reorganization plan through its Lewisville, Tex.-based subsidiary, The Apparel Group. If approved, TAL will own 100 percent of the equity of the surviving company, the documents read.
J. Hilburn owes TAL $6.6 million. Its next-largest creditor is Austin, Tex.-based Escalate Capital Partners to which it owes $2.7 million. Other creditors include Portugal-based Criaimie Rua do Facho, owed some $800,000, and a division of UPS, which is owed $666,000. All told, the company said it has assets of less than $10 million and owes more than that to creditors.
“J. Hilburn has a loyal client base,” DeFeo said. “We believe in our stylists, in the growth potential of the men’s custom market, and in the ability of our management team to lead the company to future success. Together, the company and our stylists community, along with our loyal clients, will weather this economic turmoil and come out on the other side as a stronger and more successful business.”
The company was founded in 2007 by entrepreneur Hil Davis who recruited Veeral Rathod, an investment banker, to join him as ceo. Neither are involved in the business any longer. DeFeo had been ceo of the Worth Collection before joining J. Hilburn as its chief last summer.