Wed 07/08/2020 18:55 PM
Relevant Documents:
Voluntary Petition
First Day Declaration
DIP Financing Motion
First Day Hearing Agenda


Brooks Brothers is an international clothing retailer with over 1,400 locations worldwide
Filed in the wake of “significant operational and manufacturing challenges” as well as adverse shifts in retail industry trends
The Covid-19 pandemic derailed prepetition transaction efforts
The debtors seek to run an expedited sale process and are requesting $75 million in DIP financing from WHP Global affiliate WH Holdco
Proposed sale timeline includes sale consummation deadline of Sept. 14

Brooks Brothers Group Inc., a New York-based apparel retailer, filed for chapter 11 protection today in the Bankruptcy Court for the District of Delaware to run an expedited sale process that seeks approval of a sale order by Aug. 30 and consummation of the sale by Sept. 14.

In the wake of “significant operational and manufacturing challenges,” as well as adverse shifts in retail industry trends, the debtors began exploring strategic alternatives, including a potential merger or sale of all or substantially all of their assets, with the help of PJ Solomon. The company failed to consummate a transaction before the onset of the Covid-19 pandemic, derailing their efforts and forcing the company to shutter “nearly all” of their retail and factory outlet stores worldwide.

According to the first day declaration of Ankura managing director Stephen Marotta, who serves as the debtors’ CRO, the pandemic forced the debtors and their advisors to reassess their strategy and refocus their efforts on a restructuring of their business through chapter 11. In May and June, the debtors received $32.5 million of financing secured by previously unencumbered intellectual property from an affiliate of Gordon Brothers, Brand Funding, LLC, to meet liquidity needs while the company examined its store footprint, prepared a store re-opening plan and pursued a restructuring or sale transaction. The company subsequently appointed two new independent directors to the board of directors of Brooks Brothers and a special committee of the board to oversee the company’s restructuring process. The debtors and their advisors, overseen by the special committee, worked to: “(i) carefully manage liquidity, (ii) obtain financing to allow the Debtors to preserve the value of their assets during this chapter 11 process and maximize value through a postpetition sale process, and (iii) attempt to secure a transaction that would ensure the continuation of the Brooks Brothers business and maximize value for the Debtors’ creditors.”

The prepetition sale process has yielded “significant interest in Brooks Brothers’ assets,” the declaration follows, with the company engaged in active discussions with multiple bidders. The declaration says that the debtors expect to file a bid procedures motion “in the early days of these chapter 11 cases.” The postpetition sale strategy “will be the foundation of these chapter 11 cases and will be critical to maximizing recoveries for all creditors through a value-maximizing sale transaction intended to benefit all stakeholders.”

As for postpetition financing, the debtors have obtained a commitment from an affiliate of WHP Global to provide a $75 million DIP facility that would provide “a much-needed reprieve from their short-term liquidity issues and pay off the prepetition rescue loan from Gordon Brothers.” The debtors also reached an agreement with their prepetition ABL facility agent, Wells Fargo, to allow for the consensual use of cash collateral. “Given that the majority of their stores remain closed, it will be imperative that the Debtors move expeditiously through these chapter 11 cases and utilize the liquidity available to them to consummate a value-maximizing transaction,” the debtors say.

The debtors’ prepetition capital structure includes approximately $392.1 million of funded debt, consisting of:


The prepetition ABL facility includes Wells Fargo as agent, L/C issuer and swing line lender and consists of a revolving credit facility in a maximum aggregate principal amount of $300 million and a first-in-last-out term loan facility in an aggregate principal amount of $15 million. The prepetition term loan facility entered into this spring includes Gordon Brothers affiliate Brand Funding, LLC as a lender and agent. The prepetition secured letter of credit facility lender is with Unicredit S.p.A. - New York Branch, which agreed to provide an uncommitted credit facility in the form of loans not to exceed $7.95 million and letters of credit not to exceed, together with the aggregate amount of any loans outstanding thereunder, $13.7 million.

The Haverhill mortgage, for which JPMorgan Chase Bank is the grantee or mortgagee, matures in January 2021 and bears an interest rate of approximately 6%. The Haverhill mortgage was used to finance the purchase of debtor Golden Fleece’s manufacturing facility in Haverhill, Mass. The Clinton mortgage was entered into with Dixie Development Company to finance the purchase of the debtors’ manufacturing and distribution centers in Clinton, N.C. The mortgage obligations mature in October 2022 and bears an interest rate of 3.50% per annum.

The Japan JV note is held by Daidoh Limited. The Japan JV note bears interest at the one-year Japanese Government Bond interest rate as published by the Ministry of Finance of Japan, commencing on the first business day immediately preceding August 1 of each year. The convertible note was lent by Castle Apparel Limited, an affiliate of TAL Apparel Limited, one of the debtors’ suppliers. Under the subordinated notes are obligated to board chairman Claudio Del Vecchio or entities affiliated with Vecchio. The debtors also borrowed $5 million from Vecchio that matured on Feb. 22, 2020, and remains unpaid.

The following equity holders are listed as holders of Class A common stock in the petition:


Castle Apparel Limited holds 100% of Class B common shares of Brooks Brothers Group.

The first day hearing has been set for tomorrow, Thursday, July 9 at 2 p.m. ET. The case docket can be found on Reorg HERE.

The company attributes the bankruptcy filing to a combination of declining market conditions and the Covid-19 pandemic and related store closures. The debtors cite declined revenue in recent years resulting from increased competition from online retailers and overall declines in the specialty retail industry. In response, the company earlier this year “identified a multi-year cost-optimization, and revenue growth program with the potential to materially increase EBITDA.” Prior to the Covid-19 pandemic, the company requested PJ Soloman aid in advising on possible strategic investments, including the potential sale of the company. However, while discussions were proceeding, the company hit “unprecedented liquidity and operational challenges associated with the spread of COVID-19,” which derailed the investor discussions.

The pandemic caused the company’s international operations to suffer, with certain foreign vendors being unable to operate or produce and ship inventory. Due to this, the borrowing base under the company’s prepetition ABL facility decreased in size, reducing the company’s liquidity. By March, the company had to close all North American stores and their headquarters in compliance with health guidelines. Having to primarily rely on the company’s e-commerce sales, the debtors suffered a “steep drop in revenue” due to the increase of office employees working remotely and a temporarily depressed demand for professional attire. The company estimates that from March to June 2020, the company suffered a decrease in revenue of approximately 76% year-over-year.

The company made efforts to implement cost-saving initiatives including a furlough program, reduction in employees’ hours, decreasing salaries of certain employees, suspending the company’s 401(k) matching program, consensually deferring payment of certain merchandise suppliers, consensually deferring lease payments with certain landlords and the closure of three of the company’s domestic manufacturing facilities.

However, in early April, the company determined that it needed additional financing and obtained $20 million of financing from an affiliate of Gordon Brothers. Shortly after closing, the company’s prepetition ABL agent placed the company in “cash dominion” and swept the loan proceeds. While the prepetition ABL agent continued to provide day-to-day funding, the prepetition ABL agent continued to charge additional reserves against the company’s borrowing avaliabling and eventually refused to advance any more funds to the company.

On June 29, the company obtained an additional $12.5 million in financing from Gordon Brothers to “bridge” to the eventual filing of these cases. On that same day, the prepetition ABL agent agreed to forebear from sweeping the proceeds of the $12.5 million incremental loan and reached an agreement on the consensual use of cash collateral. Using these funds, the company worked on managing liquidity, developing a store repoping plan, continuing marketing efforts and obtaining DIP financing. After securing the DIP financing, the company filed these cases and are now seeking to use these cases to “secure the best value-maximizing transaction for their estate in order to ensure that Brook Brothers’ historic business survives.”

The case has been assigned to Judge Christopher S. Sontchi (case no. 20-11785).

The debtors are represented by Weil, Gotshal & Manges and Richards, Layton & Finger as co-counsel, PJ Solomon as investment banker and Ankura Consulting as financial advisor. Prime Clerk is the claims agent. WH Holdco, LLC, the DIP agent, is represented by Fried Frank Harris Shriver & Jacobson; the prepetition ABL agente is represented by Choate Hall & Stewart and Womble Bond Dickinson, with Mackinac Partners serving as financial advisor; the prepetition term loan agent is represented by Morgan Lewis & Bockius and Reed Smith; and Claudio Del Vecchio, the Chairman of the debtors’ board, and affiliated entities, which provided subordinated and unsecured financing prepetition, are represented by Skadden.


Brooks Brothers, whose origins trace back to the opening of its first store 1818, has historically focused on “gentlemen’s clothing,” the declaration says, asserting that Brooks Brothers is “credited for being first to design the iconic buttondown polo shirt, the first to make ready-made suits, and many other inventions and introductions which have shaped the fashion landscape.” The declaration notes that Brooks Brothers has also “partnered with established fashion designers for its exclusive women’s wear collections” since 2016. Over time, Brooks Brothers has grown into “one of the world’s leading clothing retailers,” the debtors say, with over 1,400 locations in over 45 countries and a “leading” e-commerce platform consisting of a direct-to-consumer website and a mobile application.

The debtors had approximately 4,025 employees before furloughing approximately 2,900 in response to the pandemic.

According to the declaration, Brooks Brothers “maintains control over its proprietary brands by designing, sourcing, marketing, and (in large part) selling its own merchandise” and generates revenues though “various channels, including (i) North America 'omni-channel' operations (retail stores, factory outlet stores, and e-commerce), (ii) worldwide wholesale, (iii) wholly-owned international operations, (iv) non-wholly-owned international operations, and (v) other businesses and arrangements.” For the fiscal year ending 2019, revenue totaled over $991 million, the declaration states.

Brooks Brothers sells its merchandise through over 1,400 points of sale locations worldwide, including through approximately 424 retail and factory outlet stores. Those stores include stores that are operated by non-debtor affiliates, joint ventures and third-party licensees, the declaration says. Under its wholesale, travel retail and licensing segment, Brooks Brothers also “maintains high-quality partnerships with third-party franchisees and licensees that operate over 1,000 points of sale locations around the world,” the declaration adds.

Through their wholesale operations, the debtors partner with numerous well-known retailers, including Nordstrom and Macy’s, which carry Brooks Brothers products at approximately 595 locations across North America. The debtors also contract to make uniforms for companies such as NetJets and United Airlines and have a long history of manufacturing uniforms for the United States military. For the fiscal year ended 2019, the debtors’ North America wholesale business revenue totaled approximately $23 million, or approximately 3.3% of Brooks Brothers’ revenue.

Internationally, the debtors say that the brand “enjoys a premium positioning in its international markets, along with higher average retail price points.” There are approximately 606 Brooks Brothers points of sale locations across Europe, the Middle East and Africa, Japan, South Korea, Latin America and Asia Pacific, consisting of approximately 227 retail and factory outlet stores, 4 travel retail locations, 123 shop-in-shops and 252 other points of sale operated by third parties. For the fiscal year ended 2019, net sales from Brooks Brothers’ international operations totaled nearly $303 million, or approximately 30.5% of Brooks Brothers’ total revenue. Through non-debtor affiliates, the company operates retail and factory outlets in Europe, South Korea, Australia, Malaysia and Singapore. Brooks Brothers’ wholly-owned non-debtor subsidiaries (other than Canada) currently account for approximately 50 international retail and factory outlet points of sale and approximately 9.5% of Brooks Brothers’ annual revenue.

Brooks Brothers also licenses its intellectual property to its joint ventures in Japan (60% ownership), China (50% ownership) and India (51% ownership), which generally pay the debtors royalties to use the trademark and purchase products from Brooks Brothers at a set premium to sourcing cost. Brooks Brothers’ joint ventures account for approximately 167 international points of sale and 21% of Brooks Brothers’ annual revenue. The debtors’ intellectual property is critical to its ability to generate royalty revenue for the benefit of its estate.

Prepetition, all of the debtors’ finished goods were manufactured by either debtor Golden Fleece (~6.8%) or third-party merchandise suppliers (~93.2%). Golden Fleece facilities expect to completely halt operations by August 15, 2020.

The debtors’ largest unsecured creditors are listed below:


10 Largest Unsecured Creditors
Creditor Location Claim Type Claim Amount
Swiss Garments Company Ramadan, Egypt Trade $    5,232,180
FedEx ERS Pittsburgh Trade 2,944,203
Teacher's Insurance San Francisco Lease 2,857,718
Trajes Mexicano S.A. de C.V. Tianguistenco, 

Trade 2,843,652
Esquel Enterprises Limited Hong Kong Trade 2,550,522
Pt Unagaran Sarl Garments Semarang,

Trade 1,964,208
Grosvenor Urban Retail, LP Philadelphia Lease 1,190,092
T.U.W. Textile Co., Ltd.   Nakhon Chai Si, 

Trade 1,187,123
Adventura Mall Venture  Orlando, Fla. Lease 1,109,291
Epic Designers Limited Hong Kong Trade 1,067,233

The case representatives are as follows:


Role Name Firm Location
Debtors' Co-Counsel Garrett A. Fail Weil, Gotshal

& Manges
New York
David J. Cohen
Debtors' Co-Counsel Mark D. Collins Richards,

Layton &

Wilmington, Del.
Zachary I. Shapiro
Brett M. Haywood
Debtors' Investment

Derek C. Pitts PJ

New York
Debtors' Financial

N/A Ankura

New York
Counsel to the DIP

Gary Kaplan Fried Frank

Harris Shriver

& Jacobson
New York
Co-Counsel to

the Prepetition

ABL Agent
Kevin J. Simard Choate Hall

& Stewart
Mark D. Silva
Jonathan D. Marshall
Co-Counsel to

the Prepetition

ABL Agent
Matthew P. Ward Womble Bond

Wilmington, Del.
Morgan L. Patterson
Financial Advisor

for the Prepetition

ABL Agent
N/A Mackinac

Co-Counsel to the

Prepetition Term

Loan Agent
Julia Frost-Davies Morgan

Lewis &

Co-Counsel to the

Prepetition Term

Loan Agent
Kurt F. Gwynne Reed Smith Wilmington, Del.
Counsel to Claudio

Del Vecchio and

the CDV Parties
Mark A. McDermott Skadden Arps

Slate Meagher

& Flom 
New York
Edward P. Mahaney-Walter
Paul J. Lockwood Wilmington, Del.
Steven D. Adler
Counsel to UniCredit

S.p.A. - New York

William H. Schrag Thompson

New York
James J. Henderson Cleveland
Co-Counsel to

JPMorgan Chase
Jonathan W. Young Locke

David L. Ruediger
Michael B. Kind Chicago
Co-Counsel to

JPMorgan Chase
Christopher A. Ward Polsinelli Wilmington, Del.
Stephen J. Astringer
Co-Counsel to SPARC

Group and Authentic

Brands Group
Brian S. Hermann Paul Weiss


Wharton &

New York
Kelley A. Cornish
Edward T. Ackerman
Co-Counsel to SPARC

Group and Authentic

Brands Group
Christopher M. Samis Potter

Anderson &

Wilmington, Del.
L. Katherine Good
R. Stephen McNeill
United States

Richard L. Schepacarter Office of the

U.S. Trustee
Wilmington, Del.
Debtors' Claims

Benjamin J. Steele Prime Clerk New York

DIP Financing Motion

The debtors seek authority to use their cash collateral and to enter into a senior secured DIP loan facility in an aggregate principal amount of $75 million. The proposed lender and agent is WH Holdco, LLC, or Holdco, an affiliate of WHP Global. The DIP facility provides for up to 3 borrowings for a total of $75 million in the aggregate, consisting of an initial borrowing of up to $55 million, an interim borrowing not to exceed the difference between $60 million and the amount of the initial borrowing, and a final borrowing in an aggregate not to exceed $75 million minus the sums previously borrowed. Upon entry of the interim order, the DIP loan parties will repay in full the prepetition term loan obligations.

The DIP financing bears interest at 11% per annum, with an additional 2% for the default rate. The facility includes various fees, including a closing fee of 3.5% of the DIP facility and an administrative fee of $7,500 per month.

The facility matures on the earlier of (a) 6 months after the petition date, (b) substantial consummation of a plan, (c) a sale of all or substantially all of the assets of the lead borrower and its subsidiaries, (d) 35 days after the petition date if a final DIP order has not been entered, (e) the date on which the obligations become due and payable, (f) the date of conversion of any case to chapter 7 unless the agent otherwise consents in writing, (g) the date of filing or express written support by any debtor of a plan of liquidation or reorganization and disclosure statement or dismissal order that is not an acceptable wind-down unless the agent otherwise consents in writing and (h) the date any of the chapter 11 cases is dismissed.

In addition to payment of the prepetition term loan obligations, the debtors may use the DIP proceeds for (a) working capital; (b) case administration costs; (c) payment of interest, fees and expenses and all other obligations owed under the DIP documents; (d) payment of certain adequate protection; (e) funding the professional fees account; and (f) other general corporate purposes permitted by the budget and DIP documents.

To secure the DIP financing, the debtors propose to grant the following obligations, liens, and security interests in favor of the agent:

  • DIP superpriority claims for all of the obligations;

  • a perfected first priority lien on the operating account;

  • a perfected first priority lien on all other prepetition term loan collateral and on the proceeds thereof (other than real property mortgaged as of the petition date);

  • a perfected second priority lien on all assets of the DIP loan parties included in the prepetition ABL collateral junior only to (a) the first priority lien on such assets under the prepetition ABL loan documents that were subject to a lien as of the Petition Date, including after-acquired property and proceeds, and (b) all real property of the DIP loan parties that were subject to a lien of mortgages on the petition date, junior only to the first priority lien of such mortgages; and

  • a first priority lien on and security interest in all assets of the DIP loan parties not otherwise described above; and

  • liens on the proceeds of avoidance actions, except actions under Bankruptcy Code section 549.


The DIP facility does not provide for cross-collateralization other than adequate protection. It also does not provide for non-consensual priming liens.

The challenge period proposed is 60 days from formation of an official committee of unsecured creditors and 75 days from the entry of the interim DIP order for any other parties in interest. The UCC lien investigation budget is $50,000.

In support of the proposed DIP financing, the debtors filed the declaration of Derek C. Pitts, managing director and head of the debt advisory & restructuring practice at PJ Solomon. Pitts states that the debtors “will gain critical access to a DIP Facility of $75 million,” which “will be used, in part, to repay all outstanding obligations in the amount of approximately $32.5 million under the prepetition term loan.” Pitts adds that the repayment of the prepetition term loan “was a necessary condition” for the prepetition term loan parties to consent to the use of their collateral and subordination of their liens. Pitts also states that the repayment of the prepetition term loan obligations “does not prejudice unsecured creditors . . . because the aggregate amount of senior secured debt will not be increased by the repayment.”

The debtors propose the following adequate protection to the prepetition term loan parties:

  • perfected postpetition liens on all DIP collateral granted to the prepetition term loan agent and to the prepetition ABL agent;

  • an allowed superpriority administrative expense claim against the Debtors’ estates pursuant to section 503(b) of the Bankruptcy Code granted to the prepetition term loan agent and to the prepetition ABL agent;

  • payment in cash of interest, LC fees and all other fees at the default date and payment of all reasonable fees, expenses and disbursements of the prepetition ABL agent and advisors; and

  • payment of interest at the non-default rate due under the prepetition term loan and reasonable fees, expenses and disbursements of the prepetition term loan agent and advisors.


In addition, the DIP facility proposes waivers of the Bankruptcy Code section 506(c) collateral surcharge and the “equities of the case” exception under section 552(b).

The carveout for professional fees is $5 million (in excess of any amounts in the professional fees account), and the wind-down carveout amount is $500,000.

The proposed budget for the use of the DIP facility is HERE.

The DIP financing is subject to the following milestones:


The DIP loan parties shall have filed a motion with the bankruptcy court seeking approval of the interim DIP order and final DIP order. The petition date.
The DIP loan parties shall have filed the bid procedures motion with the bankruptcy court. 5 calendar days after the petition date.
The bankruptcy court shall have entered the interim DIP order, in form and substance satisfactory to the agent. 3 business days after the petition date.
The bankruptcy court shall have entered the final DIP order. 35 calendar days after the petition date.
The bankruptcy court shall have entered the bid procedures order. 35 calendar days after the petition date.
The bankruptcy court shall have entered an order approving the approved sale in form and substance satisfactory to the agent. 53 calendar days after the petition date.
The lead borrower shall have consummated the sale of substantially all of the assets of the DIP loan parties to the party determined to have made the highest or otherwise best bid in accordance with the sale order and that results in net proceeds allocated to the DIP collateral sufficient to repay the obligations in full in cash. 68 calendar days after the petition date.

Other Motions

The debtors also filed various standard first day motions, including the following:

  • Motion for joint administration

    • The debtors request entry of an order directing the joint administration of their chapter 11 cases for procedural purposes only. The cases will be jointly administered under case no. 20-11785.

  • Motion to establish trading procedures
    • The debtors seek entry of interim and final orders to establish trading procedures for common stock to preserve net operating losses, or NOLs. The debtors estimate that they have about $250 million in NOLs and other tax attributes, including consolidated disallowed business interest expense carryforwards, tax credits and aggregate tax basis in excess liabilities.

  • Motion to pay employee wages and benefits
    • The debtors seek entry of interim and final orders to pay prepetition wages, salaries, reimbursable expenses and compensation and benefits programs obligations in the ordinary course of business. The debtors seek to pay $3.05 for such obligations on an interim basis and $4.7 million on a final basis, including compensation obligations in an interim and final amounts of $850,000 and $1.7 million respectively, and employee benefits program obligations in interim and final amounts of $2.2 million and $3 million respectively.

  • Motion to authorize pre-petition payments to critical vendors
    • This motion seeks authorization to pay critical-vendor claims in an amount not to exceed $6.5 million on an interim basis and $14.5 million on a final basis, to pay undisputed prepetition lienholder claims in an amount not to exceed $3.3 million on an interim basis and $3.8 million on a final basis and confirm the administrative expense priority status of certain claim amounts relating to goods received and accepted postpetition.

  • Motion to use cash management system
    • The company seeks entry of interim and final orders to maintain bank accounts with JPMorgan Chase National Association, Bank of America, Bank of New York, US Bank, HSBC Bank, Wells Fargo Bank, National Association and UniCredit S.P.A., as well as certain “store accounts” maintained by individual stores but not constituting the debtors’ primary cash management system.

  • Motion to maintain insurance programs
    • The debtors seek entry of interim and final orders to maintain their insurance policies and programs in the ordinary course of business and to modify the automatic stay to permit employees to proceed with workers’ compensation claims. Approximately $140,000 in accrued insurance premiums are due and payable within the first 30 days of the petition date. The debtors seek to make interim payments not exceeding $326,000.

    • There are 68 pending workers’ compensation claims against the debtors. Approximately $157,000 in prepetition worker’s compensation obligations are due and payable within the first thirty 30 days of the petition date. The debtors have posted two letters of credit totaling approximately $3.6 million and $432,000, as well as made an escrow deposit of $380,000.

  • Motion to authorize debtors to continue and maintain prepetition customer programs
    • This motion seeks entry of interim and final orders authorizing the debtors to continue certain customer programs, including those relating to return and exchange, wholesale-related, gift card, loyalty and credit cards, charitable and other programs. The debtors estimate that $34.7 million in gift card obligations and $2.5 million in loyalty points and rewards obligations are outstanding.

  • Motion to pay taxes and fees
    • The debtors seek to pay certain prepetition taxes, assessments, fees, in the ordinary course of business in an amount not to exceed $2.5 million on an interim basis and $2.6 million on a final basis.

  • Motion to provide utilities with adequate assurance
    • The debtors seek the entry of interim and final orders to make an adequate assurance deposit of approximately $370,000.

  • Motion to authorize consolidated creditor matrix & motion to redact personal information

  • Application to appoint Prime Clerk as claims agent
    • The debtors seek to appoint Prime Clerk as claims and noticing agent and administrative advisor. The debtors anticipate that there will be in excess of 11,500 entities to be noticed.

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