Centric Brands exits bankruptcy

2020.10.13 Retail dive





Dive Brief:

  • Centric Brands has emerged from bankruptcy after filing for Chapter 11 in May.

  • The company has shed some $700 million in debt and will leave bankruptcy under new ownership, according to a press release.

  • After trading out debt investments for equity in the reorganized Centric, financial firms Blackstone, Ares Management and HPS Investment Partners now control the company, with Blackstone Centric being the majority sponsor.


Dive Insight:

Centric Brands was one of the first companies in the industry to seek shelter from the unfolding COVID-19 crisis. The company was forced to shut its own stores (mostly under the BCBG, Robert Graham and Joe's Jeans banners) and took an additional hit from store closures where products it makes were sold. Retail, wholesale — everything was hit.  

Centric Brands has gone through several names and incarnations over its history, which traces back to 1987, when it started out as a consumer products company, according to the company's CFO, Anurup Pruthi.

Over time the company that became Centric grew its portfolio of licensed products and private labels. Today it designs, sources, markets and sells products under licenses for Calvin Klein, Frye, Jessica Simpson, Nautica, Joe's Jeans, Timberland, Tommy Hilfiger and Under Armour, among others. 

Products under those labels from Centric Brands sell in some of the biggest retailers: Walmart, Target, Amazon, TJX Cos., Macy's, Kohl's, Nordstrom, Costco and others. Centric also operates its own stores, in-store shops and direct-to-consumer channels, depending on the brands. As of Dec. 31, the company operated 96 retail stores and 344 shop-in-shop locations, according to court documents.

A huge chunk of Centric's sales come from kids apparel, which include products made under the Calvin Klein, Under Armour, Tommy Hilfiger, Nautica and Disney licenses. In 2019, the kids segment accounted for more than half of Centric's net sales, Pruthi said in court papers when the company first filed. 

Centric's business with mass merchants deemed essential during the COVID-19 closures, including Walmart and Target, gave it some hedge during the COVID-19 closures, a restructuring officer said when the company entered bankruptcy. Still, the shutdown of much of the retail world proved too much to manage without an overhaul of the company's debt (which stood at about $1.7 billion on filing, according to Pruthi). 

Debt relief could make the company more nimble and sustainable going forward. Centric said that it is now "well-capitalized with access to substantial cash and liquidity."

"We now emerge with an optimized business structure, supportive partners, a qualified and engaged Board, and strengthened financials," CEO Jason Rabin said in the press release. "We look forward to maximizing our potential and creating opportunities for future growth."

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