UPDATE: June 7, 2021: Fashion brand owner The Collected Group emerged from bankruptcy May 26 after completing a restructuring in Chapter 11, according to an emailed statement. A group of lenders took control of the company through a reorganization that allowed the company to shed $150 million in secured debt. Existing lender KKR provided new debt capital to fuel Collected Group's growth initiatives, centered on its digital and wholesale businesses after winding down its physical footprint.

Dive Brief:

• The parent of the Joie, Equipment and Current/Elliott fashion brands filed for Chapter 11 Monday. The bankruptcy follows protracted sales declines, liquidity issues and a disrupted sale process, all of which the company attributed to the pandemic.
• The Collected Group filed with a pre-packaged plan that would turn over equity to certain secured lenders.
• The company is also looking to fully wind down its brick-and-mortar footprint to focus on e-commerce and wholesale. At its largest, the company ran 33 branded stores, according to its chief restructuring officer.

Dive Insight:

Founded in 2001, The Collected Group brings together denim (Current/Elliott) and silk (Equipment) apparel brands with contemporary women's fashion brand Joie.

The latter accounts for 55% of sales and is "one of the most sought-after contemporary brands catering to the fashion-minded woman," according to Evan Hengel, a managing director with Berkley Research Group who has served as the company's CFO and is currently its chief restructuring officer.

Hengel touted celebrities that have worn The Collected Group's brands, name-dropping in court documents Jennifer Aniston, Meghan Markle, Kate Middleton, Sarah Jessica Parker and others.

But A-listers and influencers couldn't save the company from its operational and financial troubles. The company restructured once already in 2018, after a new business management system, in Hengel's words, "went live without critical warehouse and logistics functionality operating." For nine months, The Collected Group's shipping and distribution operations were disrupted, hurting its revenue, cash flow and relationships with wholesale customers, which include major department stores. 

The profit and sales hits led to an out-of-court restructuring, after which KKR (a lender to the company then and now) converted some debt holdings into equity and took over ownership from the company's previous private equity owner, TA Associates.

With more money to invest, The Collected Group started building out its e-commerce and wholesale channels, which improved the company's profits. In late 2019, the company started a process to sell itself "to build upon that success," Hengel said. The company had interested buyers, but then COVID-19 hit. Would-be buyers backed off or lowered their offering prices.

Worse, the company's operations were upended by the pandemic. With 2020's store closures, retail revenue fell by 85% for the year and wholesale revenue fell by 70%. The one bright spot was e-commerce, which grew 37% during the year to $27.8 million and came to account for about half of The Collected Group's total revenue, according to Hengel. 

With stores closed and then struggling amid the pandemic even after re-opening, the company opted to wind down its physical retail business. It had negotiated with landlords for new terms, including variable rent, but only reached agreements with a few. Those that opened underperformed, with the pandemic still weighing on foot traffic.  

"These struggles, coupled with an increasing number of default notices from other landlords, caused the Company to make the difficult determination that brick-and-mortar retail operations were no longer viable for the Company," Hengel said. 

In bankruptcy, the company is looking to de-leverage with a plan that reduces secured debt to $30 million, down from more than $185 million. This would, according to Hengel, allow the fashion company to save jobs and vendor relationships, and also "preserve and enhance its unique and highly-regarded brand offerings through e-commerce and wholesale sales." The company restarted its sale process prior to bankruptcy, but offers so far have come in well below the value of secured debt.

The company is seeking a confirmation hearing of its reorganization plan within 45 days.