Coupounas LLC is striving to find investors willing to buy it as a going concern by Nov. 10, despite the recent loss of its rights to use the GoLite trademark it licenses from Timberland, according to an Oct. 24 motion filed in the company’s Chapter 11 bankruptcy case.
Coupounas LLC has licensed the GoLite trademark since selling it to Timberland in an innovative deal that provided GoLite much needed capital and Timberland with much needed credibility in the outdoor specialty channel. In a motion field in federal bankruptcy court Oct. 24, Coupounas LLC revealed that Timberland terminated the license sometime this fall. That means Coupounas LLC, which does business as GoLite LLC, will have to stop using GoLite trademark March 31, 2015.
It was unclear Wednesday why investors would be interested in buying GoLite LLC as a going concern without rights to the trademark, or why Timberland terminated GoLite’s license. Court records show Timberland is owed $15,600 by GoLite, a paltry sum for a company expected to generate about $1.7 billion in revenue this year. A spokesperson for Timberland said Thursday that the company would not comment on the situation. Industry sources noted that there was nothing to prevent Timberland from simply issuing a new license to should a new ownership group acquire GoLite LLC as a going concern.
Regardless, GoLite LLC co-founder and CEO Demetri “Coup” Coupounas has been reaching out to “friends and family” since Sept. 1 in hopes of raising enough money to satisfy secured creditors and recapitalize the company before the start of the holiday shopping season.
“The holiday shopping season begins in less than six weeks and any buyer-strategic, financial or asset disposition-will want the transaction closed and funded before the holiday season begins in earnest,” the company argued in an Oct. 24 motion to set a Nov. 10 deadline for bids. “Accordingly, the Debtors value will be higher if a buyer (or buyers) can avail themselves of the holiday season and values will, in all likelihood, drop substantially after the holiday season.”
Bidders have until 4 pm mountain time Nov. 10 to submit bids to either acquire the company as a going concern or for liquidation purposes. Bidders interested in liquidating the company, must guarantee they will pay at least 69 percent of the aggregate cost of the merchandise they would liquidate at the company’s six remaining stores and distribution center in Colorado to satisfy Coupounas LLC’s sole secured creditor.
Should two or more investors submit bids for GoLite LLC, the company’s agents will hold an auction by Nov. 14. Should no bidders emerge, GoLite’s stalking horse bidder Hilco Merchant Resources, LLC, will initiate going-out-of- business sales at its six remaining Colorado stores and at golite.com. Hilco has guaranteed GoLite LLC a payment of at least 65 percent of the aggregate cost of the merchandise being sold, which is expected to be between $780,000 and $877,500. That sum would go entirely to paying off GoLite’s lone secured creditor GemCap Lending I, LLC, which is owed $816,475. Hilco would keep the balance plus 20 percent of earnings from the sale of store fixtures. If GoLite is able to attract a more attractive bid, Hilco is entitled to $25,000 breakup fee.
A rocky relationship
The bankruptcy marks the latest development in Timberland’s rocky relationship with the Coupounases, who were originally resistant to the idea of selling the GoLite trademark. In the end, however, the company took Timberland’s offer because it provided much needed capital that enabled them to avoid selling equity in their company and because they expected the money Timberland would spend promoting GoLite footwear would benefit their line of ultra-light outdoor apparel and gear.
Less than two years after the deal, however, Timberland shut down both its Mion and GoLite footwear ventures after efforts to sell the brands failed. Two months later, Timberland sold the rights to make GoLite footwear to a company founded by the former Timberland executive who had launched Mion and GoLite. That company, New England Footwear, continues to make and market GoLite footwear. Timberland, meanwhile, was acquired in 2011 by VF Corp, which owns outdoor performance footwear maker The North Face.
The latest bankruptcy filings reveal GoLite LLC began having cash flow problems in 2013 after opening 20 stores following its decision a year earlier to stop wholesale distribution and focus solely on selling direct to consumers. Sales grew nearly 23 percent to $17.7 million in 2013 when it opened more than a dozen stores and reached $8.77 million in the first nine months of this year, when the company closed 14 of its stores.
Demetri and Kim Coupounas first met with outside financial advisers Feb. 8, 2014 to explore a possible sale of the company and other financial options. Over the next six months, GoLite LLC sent summaries to 100 potential investors. Sixteen of those companies signed non-disclosure agreements so they could review the company’s books, but none submitted bids to acquire the company as a going concern, including some who could not arrange financing, court filings show. It is not clear from bankruptcy filings when Timberland told the company it was terminating its license to use the GoLite trademark.
On Oct. 13, Coupounas LLC filed its Chapter 11 bankruptcy petition. The court has since approved its motion to reject leases at its closed stores and discharge other debts. Those actions may persuade investors who passed on the company earlier to best Hilco’s stalking horse bid come Nov. 10.
