Sequential Brands Group Inc. announced that it, together with its wholly-owned subsidiaries, has commenced voluntary Chapter 11 proceedings in the U.S. Bankruptcy Court for the District of Delaware.

In June, reports arrived that Sequential Brands was close to reaching a deal with lenders to file for bankruptcy protection to divest its portfolio of brands or to sell the company.

The company has since sold its DVS Footwear Brand to Elan Polo International Inc. for $2 million in cash and Ellen Tracy and Caribbean Joe brands to GMA Group for a total of $20 million. In April, it sold Heelys to BBC International, which had been licensing the brand for $11 million. Brands still owned by Sequential Brands include AND1, Gaiam, SPRI, Avia, Jessica Simpson, William Rast, Caribbean Joe, and The Franklin Mint.

In a statement, Sequential said it determined that, as a result of the significant debt on its corporate balance sheet, it was no longer able to operate its portfolio of brands. Accordingly, in conjunction with the filing, the company would pursue the sale of all, or substantially all, of its assets under Section 363 of the U.S. Bankruptcy Code. The company would seek approval from the Court of auction and bidding procedures that are designed to maximize the value of the company’s assets through an open process that enables interested buyers to submit a bid or bid(s) on the company’s assets. The company believes that each of its brands is well-positioned for profitability under the stewardship of new owners.

In connection with this in-court process, Sequential will obtain $150 million in debtor-in-possession (DIP) financing from its existing Term B Lenders. The company expects this new financing, together with cash generated from ongoing operations, to provide ample liquidity to support its operations during the sale process. The proposed transactions will be implemented pursuant to the terms of a Restructuring Support Agreement reached between the company and its Term B Lenders.

Sequential has filed customary motions seeking court approval to continue supporting its operations during the court-supervised process, including the continued payment of employee wages and benefits without interruption and other relief measures customary in these circumstances.

Gibson, Dunn & Crutcher LLP and Pachulski Stang Ziehl & Jones LLP are serving as Sequential’s legal counsel. Stifel and its affiliate Miller Buckfire & Co. are serving as Sequential’s investment banker.

Additional information regarding Sequential’s financial restructuring, including court filings and information about the claims process, are available here.

Photo courtesy Sequential Brands