California Apparel News

Weeks after an offer was made to take BCBG Max Azria out of bankruptcy as a shell of its former self, a U.S. bankruptcy court has approved the $165 million offer.

On June 23, the U.S. Bankruptcy Court in New York gave the go-ahead for Marquee Brands and Global Brands Group Holding to take over the intellectual property of BCBG Max Azria as well as operate about 20 stores in the Los Angeles company’s retail fleet.

A final approval to confirm the reorganization plan for the women’s contemporary clothing label is expected to be made by the court no later than July 31.

The winning bid for BCBG was placed on June 9, with Marquee Brands offering to pay $108 million for the label’s intellectual property, which includes global rights. Global Brands came up with $23 million for inventory and the right to keep as many as 22 stores running as well as operate BCBG's shops-in-shops and the BCBG e-commerce site. Global Brands will be licensed to manufacture certain material and core categories for BCBG. Once the acquisition is completed, Marquee Brands will be expanding BCBG, BCBGeneration and Herve Leger into additional lifestyle categories, sources said.

Liquidators Hilco Global and Gordon Brothers are also members of the bidding consortium.

No other offers that beat the Marquee and Global Brands deal were made by the June 20 deadline.

Meanwhile, Lubov Azria, who was fired from the company in March as BCBG’s chief creative director, filed a proof of claim earlier this month maintaining the bankrupt company owes her $6.7 million for lost wages and severance pay. This comes after she filed a labor contract lawsuit against BCBG insisting she was illegally dismissed and was owed $7 million for wages and a golden-parachute payout. That lawsuit was rejected by the bankruptcy court.

On June 24, BCBG’s bankruptcy lawyers filed a formal objection to Azria’s proof of claim, asking that the claim be reduced to an unsecured claim for $1.7 million. In bankruptcy cases, unsecured claims receive pennies on the dollar of the full amount owed. A hearing on the matter is scheduled for July 25.

Since filing for Chapter 11 bankruptcy protection on Feb. 28—with more than $460 million in debt—BCBG Max Azria has shuttered 120 U.S. stores that racked up $10 million in losses in fiscal 2016. Most of the closed BCBG Max Azria stores were stand-alone locations and premium-outlet stores, but a handful were Hervé Leger stores, a French brand acquired years ago by BCBG Max Azria. Some 71 stand-alone BCBG locations remain open.

The company’s 276 in-store shops—at outposts such as Bloomingdale’s, Dillard’s, Lord & Taylor and Macy’s—have been profitable and continue to operate.

BCBG Max Azria also had a presence in Asia, Europe and Canada. BCBG shut down its 51 stores in Canada, but Global Brands Group hopes to continue to operate the stores-within-stores at the various Hudson’s Bay Co. outposts.

In Japan, there are 13 BCBG stores that the company would like to see someone take over. If no one steps forward, they will be closed.

And in Europe, most of the BCBG stores are concentrated in France, with about 34 locations. The bankrupt company, again, would like a third-party to come in and run the stores.

As BCBG has been trying to emerge from bankruptcy, it has also been trying to wrap up a lawsuit against two companies licensed to make BCBG-branded intimate apparel and swimwear.

In a complaint filed last year in Los Angeles County Superior Court, BCBG maintained it was not paid royalties for licensed clothing made for the 2015 season by UBI Apparel, Gottex Swimwear Brands and Gottex Models USA.

According to court documents, the lawsuit has been resolved with the defendants agreeing to pay BCBG $825,000.

Retail woes

At one time, BCBG, which stands for Bon Chic, Bon Genre—or good style, good attitude—employed 1,300 full-time workers and 1,400 part-time workers, with headquarters in Vernon, an industrial area adjacent to Los Angeles.

The women’s contemporary label was started in 1989 by Max Azria, who was born in Tunisia, moved to France and later to the United States. The brand’s clothing has a sophisticated feel and higher prices, with dresses going for $250 to $750, and tops and bottoms selling for $150 to $250.

As the company grew, so did the brand’s headquarters, which encompassed 265,000 square feet. The building is owned by Max Azria and leased to the company he started. He also owns the company’s warehouse, which was leased to BCBG.

BCBG’s fate follows the same struggles that other retailers and manufacturers are facing—with increasing competition from online sites that make it easier to buy clothing and fast-fashion stores that offer cheaper alternatives. As BCBG Max Azria tried to maintain its unprofitable stores, its debt grew. Guggenheim Partners and affiliates now carry more than $324.4 million in BCBG loans and own 80 percent of the apparel company’s common equity.

Since Max Azria was pushed aside last year to make way for interim chief executive officer Marty Staff, the BCBG founder has found a new career. He is the CEO of ZappLight, a venture he invested in that makes LED light bulbs that zap and kill bugs. The company has offices in Los Angeles and Shanghai.