The London Fog Group has initiated a major financial restructuring of its business which includes the Pacific Trail outerwear business; the London Fog luxury apparel brand; and Homestead, a successful home textile business. To effect the restructuring, London Fog Group has filed a voluntary petition to reorganize under Chapter 11 of the United States Bankruptcy Code.
London Fog Group is pursuing the Chapter 11 filing principally as a result of the group being unable to secure sufficient working capital and other financing to properly fund its operations. The petition was filed in the U.S. Bankruptcy Court for the District of Nevada, in Reno. Subject to court approval, the Company plans to continue to operate its business under Chapter 11, as it implements its restructuring.
Supporting London Fog Groups working capital needs during its reorganization, Wachovia Bank, N.A. has agreed to provide London Fog Group with $40 million in debtor-in-possession (DIP) financing. The Company is currently seeking Bankruptcy Court approval of the financing package.
A major first step in its financial restructuring, the Company has determined to pursue a prompt sale of its Pacific Trail outerwear business as well as the Moonstone brand. Pacific Trail has built a national reach of over 10,000 stores and possesses a particularly attractive base of personnel, brands and assets. Upon court approval, London Fog Group will hold an auction for the assets of Pacific Trail in the immediate future. The Company has entered into an asset purchase agreement with Perry Ellis International, as a “stalking horse” bidder, to acquire the Pacific Trail brands, certain licenses and other specified assets, and assume certain performance and other obligations solely in respect of the purchased assets, for a total cash purchase price of $14.5 million, subject to adjustment and to Perry Ellis rights of continuing due diligence for a limited period in accordance with the terms of the agreement. The acquisition by Perry Ellis International, which is the parent company of Perry Ellis Brands, will be conducted pursuant to section 363 of the Bankruptcy code and is subject to any “higher and better offers” to be submitted through an auction process to be administered by the U.S. Bankruptcy Court.
David Greenstein, CEO of the London Fog Group, commented; “We have forged three very attractive businesses targeting distinct markets, yet we find ourselves without sufficient capital to fund the full groups expected growth. London Fog Group has determined to divest our Pacific Trail business as it represents a very strong group of nationally recognized, successful brands with excellent prospects for growth. Given our desire to move quickly, combined with or duty to best serve the long-term interests of our stakeholders, the divestiture of Pacific Trail was the logical choice to effect a transaction quickly.
“Pacific Trail is an authentic Northwestern brand that has established a strong presence at over 10,000 retailers and has been positioned for rapid growth in the outwear, sportswear, footwear and home textile markets. This combined with Pacific Trails tremendous team and geographic reach make us confident that its strengths will be recognized in the auction process and have already been reflected in a strong initial bid.”
