As of Thursday, July 27, 2017
In the latest saga in the bankruptcy case of BCBG Max Azria Group, a federal judge has denied Lubov Azria’s attempt to receive nearly $7 million in lost wages and a payout known as a golden parachute.
In June, Azria, who was the Los Angeles fashion brand’s chief creative officer before she was fired in March, filed an administrative claim in U. S. bankruptcy court to recuperate money she felt she was owed after signing an employment agreement.
But on July 25, that administrative claim was denied by U.S. Bankruptcy Judge Shelley Chapman in New York even though Azria’s attorneys maintained her dismissal from the company was a post-bankruptcy act. Azria’s claim was reduced to a general unsecured claim, which, if paid off, gets only pennies on the dollar.
This is Azria’s latest attempt to recuperate the funds she felt she was owed. Months earlier, she filed a labor contract lawsuit against BCBG insisting she was illegally dismissed and was owed $6.7 million for wages and a golden-parachute payout.
The former creative director said she signed an employment contract guaranteeing her long-time employment that was part of an out-of-court restructuring agreement in 2015 with investors, including affiliates of Guggenheim Partners Investment Management. The restructuring agreement reduced the Azria family’s 100 percent ownership of the fashion house to 20 percent. Guggenheim Partners, which has outstanding loans of more than $324.4 million to BCBG, has been running the company for the past two years.
In court papers, BCBG said it was not required to make a nearly $7 million golden-parachute payment to Azria and maintained her dismissal was “consistent with the contract’s language as well as the sound exercise of business judgment.” That lawsuit was rejected by the bankruptcy court with Azria returning to court with an administrative claim.
This is the latest chapter in the Feb. 28 bankruptcy filing of the once high-flying apparel company founded in 1989 by Max Azria, who is married to Lubov Azria.
Over the years, the company incurred millions of dollars in debt as its stores became less profitable. At one time, BCBG and its other brands had a fleet of 550 stores in the United States, Europe and Japan but in recent years those numbers declined.
Last year, the BCBG retail chain racked up $10 million in losses but its in-store shops at major retailers such as Macy’s, Bloomingdale’s and Lord & Taylor were profitable.
Earlier this year, BCBG closed 120 stores, keeping 71 still operating in major cities.
The bankruptcy court on July 25 also approved the plan for Marquee Brands, Global Brands and partners to pay $165 million for BCBG’s intellectual property, inventory and the right to keep 42 stores open as well as operate the BCBG e-commerce site.
BCBG creditor Allerton Funding will receive a junior interest in the intellectual property royalties until its $55 million in loans are paid off. Guggenheim Partners will receive $1.75 million and the unsecured creditors will have to divvy up $900,000.
The acquisition by Marquee Brands and its group is expected to close on or before July 31.