True Religion Files for Bankruptcy

After emerging from Chapter 11 bankruptcy in 2017, Los Angeles denim brand True Religion filed again this week. In documents filed April 13 with the United States Bankruptcy Court for the District of Delaware, the brand’s list of companies to whom it is indebted included within its top-30 major creditors OA S.A., Lya Group, Dhruv Globals Ltd., Excel Kind Industrial, Salesforce, Facebook, Google and the Manchester United Football Club, the professional English soccer club with whom True Religion launched a partnership in October 2018.

“The apparel industry, in general, is going to go through a tough year, but, in regard to True Religion and similar companies with a similar situation, there is significant concern regarding whether they’ll survive,” said Robert Hirsh, a bankruptcy-restructuring partner with Lowenstein Sandler LLP. “Either they do a restructuring that entails a reduced footprint of bricks-and-mortar-stores locations or ramp up their online platform and restructure financially and operationally.”

In its filings, True Religion cited as causes for its bankruptcy the COVID-19 pandemic and subsequent stay-at-home orders that affected its bricks-and-mortar locations in addition to those of its wholesale partners, which exacerbated its existing issues with liquidity. Additionally, the documents noted True Religion’s furlough of nonessential employees. Assets and liabilities for True Religion were listed between $100 million and $500 million.

“[True Religion has filed] the Chapter 11 cases amid an unprecedented health crisis with difficult social, political and economic implications. While the debtors would have preferred to wait out the current instabilities of the financial markets and retail industry generally, they simply could not afford to do so,” the documents stated. “The relief sought in this motion is critical to maintaining the debtors’ viability as a going concern and necessary to ultimately operate their businesses when the mandated closure of nonessential retail is lifted.”

In July 2017, the company filed for Chapter 11 bankruptcy, noting its outstanding debt totaled $483 million. The company, co-founded in 2002 by Jeff Lubell and sold to TowerBrook Capital Partners in 2013, announced in October 2017 that it had adopted a smaller footprint with cash to continue business following its exit from its first Chapter 11 bankruptcy.

“It’s not just a phrase, but the biggest thing to watch out for in this bankruptcy is the first 30 days of the case,” Hirsh said. “What does the debtor do? What is their path? Are they going to immediately attempt to restructure with certain landlords closed?”