Rumor turned to reality on Tuesday as BCBG Max Azria filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court Southern District of New York, according to court documents.
In the process, the company has received commitment for $45 million in new financing to fund restructuring efforts, which include a focus on digital, e-commerce and wholesale and licensing agreements.
The company expects to complete its reorganization within six months and will keep its stores open in the process, though earlier this month, it announced the closure of 120 stores, mostly in the U.S., as well as its freestanding stores in Canada. The company says it will consolidate its operations in Europe and Japan.
Founded in 1989 by Tunisian fashion designer Max Azria (who was also its CEO until last year), BCBG Max Azria Group’s fashion fans once counted the likes of Angelina Jolie, Rachel Bilson, Eva Mendes, Kate Winslet, Victoria Beckham, Alicia Keys and Catherine Zeta-Jones. Azria based his vision and his company name on “bon chic, bon genre," Parisian slang for "good style, good attitude."
But the rise of e-commerce and changing consumer expectations, including new pressures to speed up the supply chain to slake the thirst for “see now, buy now” releases, have taken a toll.
"The steps we are taking now, to address the shift in customer shopping patterns and the growth of online shopping, will allow us to focus on our partner relationships, digital, ecommerce, selected retail locations and wholesale and licensing arrangements,” Marty Staff, Acting Interim CEO, said in a statement. “The Chapter 11 filing will further aid the implementation of these steps and overall strategy while we explore opportunities to recapitalize the company and profitably expand our international footprint."
To that end, the company has received commitments from its existing asset-based and term loan lenders to provide financing as it regroups; it listed assets of between $100 million and $500 million and liabilities between $500 million and $1 billion, according to its court filing. The company is being advised by AlixPartners, LLP and Jefferies LLC as its restructuring advisors, and by Kirkland & Ellis LLP as its legal advisor.
One question is whether its lenders will have the patience to see the retailer’s turnaround through. Others have not been so lucky. BCBG is just the latest in a series of retailers entering Chapter 11 protection and shuttering stores in recent months, and many, like The Limited Stores, Wet Seal and American Apparel, have buckled under the debt loads of their financial sponsors.
In the wake of a disastrous holiday shopping season, Macy’s also announced last month it could slash more than 10,000 jobs as it closes 68 stores and reorganizes its remaining locations. And Sears Holdings has said it will close an additional 150 unprofitable locations, including 108 Kmart and 42 Sears stores, in order to curtail losses.