(Filed Under wholesale Lingerie News). When Frederick’s of Hollywood filed for bankruptcy Sunday, it listed four lingerie wholesalers among it 30 largest creditors. And it revealed that it already has an offer of $22.5 million from Authentic Brand Group for its remaining inventory, shared revenue from future licensing opportunities and the right to run its online store, which will remain open during bankruptcy proceedings.
Just prior to its filing, Frederick’s, which had been in the process of closing some of its stores, announced it had closed them all. Frederick’s is planning an auction for the various assets on May 28. The possibility remains that a higher bidder may come forward, and even one that might choose to re-open all or some of the brick and mortar stores. The latter possibility seems rather remote since the company said it removed inventory, “closed their retail stores and physically vacated the corresponding 74 leased premises and surrendered the keys to the applicable landlords” prior to the filing.
Among the trade creditors listed in the bankruptcy filings are Longray Intimates (a firm affiliated with Lingerie International Co Ltd. of China) which was owed $2,366,126 as of April 15; Montelle, with a claim of $1,313,319; National Corset (Shirley of Hollywood), with a claim of $575,304; and Ascension Lingerie & Swimsuit, with a claim of $412,416. Also listed is Thomas Lynch, who had been chairman and CEO at the company for several years up until last summer when he left the firm. His claim is for $1,214,141 related to his employment contract. Other creditors include Salus Capital Partners and a long list of landlords. Frederick’s estimates is has total assets of about $36.5 million and liabilities of about $106 million.
Frederick’s said it filed for bankruptcy “amidst a sustained decline in operating revenue attributable to increased competition from other apparel retailers and brands, decreased foot traffic in shopping malls, and weak discretionary spending by target consumers due to the recent economic downturn. This confluence of factors, together with the rising cost of wholesale inventory and onerous real property lease terms, ultimately resulted in the cessation of the debtors’ retail store operations prior to the petition date.”
One lingerie wholesaler who has been doing business with Frederick’s for years (and who asked to remain anonymous) said the filing was “a shame,” but blamed it on “mismanagement.” Over a period of six years, up until May of 2014, and operating as a public company, Frederick’s racked up combined losses of over $100 million. Fredericks was acquired early last summer by Harbinger Group Inc. (now HRG Group) and taken private. At that time there were 94 stores. As of February, 2008 the company had been operating 135 retail shops.
Frederick’s had previously filed for bankruptcy in July 2000, and emerged in December 2002. In December of 2006 the company merged with the public company Movie Star, with the combined entity then taking on the Frederick’s of Hollywood name.
Authentic Brands Group (ABG) is a licensing company that lists 25 brands with which it works on its website. Prominent among them are Tapout, Marilyn Monroe, Juicy Couture, Adrienne Vittadini and Airwalk. Under its deal with Frederick’s it must share any future licensing revenue. “Immediately following such time as ABG receives $10 million in net brand revenue, ABG shall perpetually and immediately begin to pay FOH [Frederick’s] or its successor,” the agreement reads, “25% of the net brand revenue and 25% of other revenue.”
Frederick’s currently has licensing agreements in place with a handful of companies including Mystery House Costumes, Roffe Accessories, Lady Sandra Home Fashions and others.
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