Frederick’s of Hollywood Has Buyer in Mind With Bankruptcy Filing
With a mountain of debt piling up, Frederick’s of Hollywood filed for Chapter 11 bankruptcy protection after closing all its stores.
In the April 20 filing in U.S. Bankruptcy Court in Wilmington, Del., the longtime Los Angeles retailer of all things frilly and sexy in the lingerie category said it had reached an agreement for Authentic Brands Group to pay $22.5 million and 25 percent of future brand revenue for Frederick’s website, inventory and intellectual property. If other offers materialize, the company will hold a court-authorized sale process and auction.
On April 15, Frederick’s closed all its stores across the country and said it would only be selling its merchandise online. But even before the store closings, the company was already preparing to file for bankruptcy protection.
The company listed $36.5 million in assets and $106 million in debt. Among the major unsecured debtors are Longray Intimates in Diamond Bar, Calif., owed $2.4 million; the Shops at Mission Viejo shopping center, owed $1.8 million; Moac Mall Holdings, parent company of the Mall of the America in Bloomington, Minn., owed $1.2 million; Macerich’s Fashion Fair mall in Fresno, Calif., owed $934,962; the Westfield Culver City mall, owed $672,932; and the Macerich Lakewood Center mall, owed $626,186.
In its filings, Frederick’s said it had faced increased competition from other retailers and brands, had seen a drop in foot traffic at malls and had suffered during the economic downturn, when consumers’ discretionary spending took a hit.
Frederick’s said in court documents that it will seek to obtain $11 million in bankruptcy financing from its current lender, Salus Capital Partners, which is owed $33 million in secured debt.
Frederick’s of Hollywood was founded in 1947 by Frederick Mellinger, the apparent inventor of the push-up bra. The company has had its ups and downs. In 2000, it filed for bankruptcy protection but emerged from bankruptcy in late 2002. Through a reverse merger, it went public.
At its height, it had 200 stores across the country. Last year, when the publicly traded company was taken private for about $25 million by investors led by a unit of Harbinger Group Inc., it had 94 stores. Currently, Lori Greeley is the acting chief executive, and William Soncini is the chief operating officer. The company’s headquarters is on Sunset Boulevard in Hollywood.