California Apparel News

Rock & Republic, a premium-denim lifestyle brand based in Culver City, Calif., filed for Chapter 11 bankruptcy protection on April 1 in U.S. Bankruptcy Court in New York due to a huge debt owed to Richard Koral.

The company, founded in 2002 by Michael Ball, has hired Geoffrey Lurie as its chief restructuring officer and has secured $7.5 million from CIT Group, its factor. Lurie helped turn around The North Face Inc. in the late 1990s.

Calls to Rock & Republic for comment were not returned by press time, but court filings indicate the denim maker’s primary reason for the petition’s filing is a $15 million debt owed to RFK, LLC, a company owned by Koral, an off-price seller of branded goods that include Rock & Republic. Koral’s brother, Peter Koral, is a co-founder of 7 For All Mankind, another premium-denim label.

Rock & Republic borrowed the $15 million from Koral in November 2007 and was to have repaid it in May 2009, but the loan was extended to April 2. As collateral, Rock & Republic put up its brand name to secure the large loan, which had a 15 percent interest rate starting Feb. 1, 2010.

“The debtors do not have available the funds necessary to pay the [$15 million] plus interest due to RFK under the loan agreement, and RFK has refused to further extend the term of the loan upon conditions that are acceptable to the debtors,” the petition states.

Under the terms of the loan, Koral would be entitled to all of Rock & Republic’s intellectual property, trademarks and trade names should the company default on the loan.

The filing is a last-ditch effort to prevent RFK from moving forward with the sale or acquisition of the Rock & Republic name. “It is the debtor’s intention in this reorganization proceeding to find a replacement lender for RFK on terms and conditions that the debtors find acceptable or in the alternative to restructure the existing loan with RFK,” the court filing said.

Koral, who was not available for comment, is by far Rock & Republic’s biggest secured creditor, but the company owes its 25 largest unsecured creditors nearly $10 million.

The company also owes CIT $5.7 million. CIT, in turn, owes Rock & Republic nearly $1.2 million.

Court filings give further insight to the denim maker’s business. In 2009, Rock & Republic had $97.6 million in sales with earnings before interest, taxes, depreciation and amortization ringing in at nearly $9.8 million.

The company, which has 180 employees and operates three retail stores, wholesales its pricey jeans to retailers such as Neiman Marcus, Nordstrom, Bergdorf Goodman and Saks Fifth Avenue.

The blue-jeans company expects operations to continue as normal. CIT Group has agreed to continue with its factoring agreement with Rock & Republic.—Erin Barajas