Creditors of private equity-backed clothing brand Ellen Tracy are trying to force the company into bankruptcy over claims totaling about $3.8 million.
The creditors, which include Shanghai Mandarin Fashion, Excellent Jade, Chinamine Trading and Shanghai K & J Apparel, have filed an involuntary Chapter 7 bankruptcy petition against the company. Kenneth Rosen, of Lowenstein Sandler, is representing the creditors. As a Chapter 7 filing, the creditors simply want to liquidate the company’s assets to get their money back, rather than put it through a restructuring.
The creditors claim they are owed the money for goods sold the company.
An involuntary bankruptcy petition can be a risky move because the firms filing the petition can be liable for damages and legal costs if the petition is not ultimately approved.
Ellen Tracy, formerly owned by US fashion and beauty Liz Claiborne, was acquired by a private equity consortium last year for about $42 million. Firms in the deal were special situations investor Radius Partners, Windsong Brands, which targets consumer companies and Hilco Consumer Capital. The firms have not yet responded to the petition.
Liz Claiborne bought the brand in 2002 for $170 million from the company’s founder, Herbert Gallen, and fashion designer Linda Allard. Liz Claiborne sold the brand at a time when the company was performing a strategic review of 16 of its brands as it wanted to grow specific brands, including Juicy Couture, Kate Space, Lucky Brand Jeans and Mexx brands.
Ellen Tracy began in 1949 as a blouse company and has been represented in marketing campaigns by models like Cindy Crawford and Stephanie Seymour.
Private equity has recently been caught up in another involuntary bankruptcy case this summer. TowerBrook Capital Partners attempted to force GTCR Golder Rauner-backed Wilton Holdings, a maker of food decorating equipment, into bankruptcy. TowerBrook filed an involuntary petition along with Deutsche Bank. The firm and the bank hold claims of $104 million each against Wilton.
Wilton earlier this month reached a preliminary agreement with the creditors to halt the involuntary bankruptcy proceedings while the two sides try to iron out an agreement.