The troubled owner of Jessica Simpsons brand is on the verge of a deal to sell its controlling stake in the clothing line back to the singer and to outsource other assets in a possible Chapter 11 bankruptcy filing, according to people in know of the plans .
Sequential Brands Group Inc. had attempted to sell its assets to avoid a liquidity crisis while negotiating with creditors, but is now preparing to discharge its brands in a process that is likely to take place in court, they said the people who did not ask are called to discuss private business plans. The company would use the proceeds from the sales to repay creditors including its largest lender, KKR & Co., the people added.
The plans are not final and certain items could change, people said. A Sequential Brands representative did not respond to requests for comment. A representative from KKR declined to comment, while Jessica Simpson’s representatives failed to comment.
New York-based Sequential owns and licenses, in addition to Jessica Simpson’s clothing and footwear line, a number of consumer fashion and sportswear brands, including Joe’s Jeans and Gaiam’s yoga business. It sold the Heelys brand for $ 11 million in April.
Sequential stock fell as much as 11% to $ 10.80 on Thursday morning in New York after Bloomberg reported on asset sales and bankruptcy plans. Shares were down 16% that year by the close of trading on Wednesday.
KKR and other lenders recently extended an existing loan default waiver to July 8th. Sequential has been lenient with its lenders since late 2020 after it announced it was unable to meet certain financial metrics required under its debt contract due to the pandemic. Retailers and brands across the country have suffered from the effects of Covid-19 and the associated store closures. More than 20 filed for bankruptcy protection last year.
The company also faced a government investigation into its accounting practices. The Securities and Exchange Commission indicted Sequential in late 2020 for misleading investors with accounting errors that masked their financial troubles.
Last month, Sequential granted two executives a one-time cash retention bonus based on their “continued full-time employment” with the company through events such as reorganization or liquidation.
(Updates with share price in the fifth paragraph.)
Before it’s here, it’s at the Bloomberg Terminal.