The Collected Group files for Chapter 11 bankruptcy

June 2021 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

June 2021 Issue

As one of many apparel and lifestyle companies in the US to have closed its doors over the past 12 months, women’s fashion company The Collected Group has filed for Chapter 11 bankruptcy.

The company plans to use the bankruptcy process to facilitate store closures and cut more than 80 percent of its debt. Like many apparel and lifestyle retail companies that have been hard hit by reduced store traffic both prior to and during the coronavirus (COVID-19) pandemic, The Collected Group had sought to renegotiate leases with its landlord.

Under the Chapter 11 process, The Collected Group will be able to exit leases and pay capped damages for doing so, which makes it financially feasible to close stores.

James Miller, the company’s chief executive officer since 2017, will step down from his role to take on an adviser title as well as serve on the company’s board. Mr Miller’s successor will be Silvia Mazzucchelli, a board member who was also the former chief executive of Modcloth.

Going forward, The Collected Group is looking to completely close its brick-and-mortar footprint to focus on e-commerce and wholesale. At its largest, the company ran 33 branded stores, however since the outbreak of the pandemic and resultant initial store closures, it began to scale back its physical presence.

“These struggles, coupled with an increasing number of default notices from landlords, caused the company to make the difficult determination that brick-and-mortar retail operations were no longer viable,” said Evan Hengel, chief restructuring officer of The Collected Group. “With 2020’s store closures, retail revenue fell by 85 percent for the year and wholesale revenue fell by 70 percent. The one bright spot was e-commerce, which grew 37 percent during the year to $27.8m and came to account for about half of The Collected Group’s total revenue.”

Founded in 2001 and headquartered in Los Angeles and New York, The Collected Group is recognised globally as a leading designer, distributor and retailer of three contemporary, consumer-inspired, apparel lifestyle brands: Joie, Current/Elliott and Equipment. The retailer has around 125 employees, according to its Chapter 11 filing.

Owned by private equity firm KKR, The Collected Group has assets of between $50m and $100m and liabilities between $100m and $500m, according to its Chapter 11 petition. The company listed mall venues and landlords including Century City Mall LLC and Tysons Galleria and a number of clothing vendors among its creditors.

Following the Chapter 11 process, KKR is expected to retain ownership of The Collected Group and facilitate a restructuring of the retailer’s balance sheet. The company has approximately $185.3m in funded debt obligations and about $35.5m in unsecured debt, which includes unpaid debt and damages for rejecting leases.

“I am incredibly proud of what has been accomplished over the last four years at The Collected Group,” said Mr Miller. “The unique opportunity to serve as both chief executive and chief creative officer allowed me to ensure that business objectives and brand vision were always aligned.

“The Collected Group will continue to sharpen its focus on direct-to-consumer e-commerce, domestic and international wholesale, with the restructuring enabling the company to compete in these channels from a position of greater financial strength,” he continued. “I step away from day-to-day leadership of the company confident that it is well-positioned for the future.”

Fraser Tennant