After many loss-making quarters and the sale of four brands - Heelys, DVS Footwear, Caribbean Joe and Ellen Tracy - earlier this year, the heavily indebted Sequential Brands Group has commenced voluntary Chapter 11 proceedings in the U.S. Bankruptcy Court for the District of Delaware to protect it from its creditors. It listed debts of $435 million against assets of $443 million. In a statement on the company’s investor’s site, Sequential said that it is seeking approval to continue its remaining operations during the court-supervised process, including the continued payment of employee wages and benefits without interruption.
At the moment, the company still owns seven other brands. Galaxy Gainline Holdings, the company that acquired Apex Global Brands as well as ESO Active last year, has made a “stalking horse bid” of $333 million for Sequential’s remaining active brands, including Avia and And1, Gaiam and Spri. Galaxy is currently a licensee of And1 and Avia. It was a former investor in Prince and Riddell.
Sequential indicated in its bankruptcy filing that it will continue to sell its assets as part of a deal with some of its lenders, including KKR. They have pledged to grant it $150 million worth of debtor-in-possession financing to help continue to operate. Wilmington Trust will serve as administrative agent.
As a result of the Chapter 11 filing and Sequential’s failure to publish its quarterly results, trading in the company’s common stock on Nasdaq will be suspended on Sept. 9, 2021, and a Form 25-NSE will be filed with the U.S. Securities and Exchange Commission to remove it from the stock exchange.
Sequential has gone on record as considering strategic alternatives, including the sale of individual brands or the whole company, since the autumn of 2019. Unfortunately, the Covid-19 pandemic hindered the sale process when it was formalized in March 2020. The subsequent retail lockdowns and general malaise in the market sent the company’s licensing revenues down, leading the company to seek waivers on its loan covenants.
