Longtime Manufacturer Closes Its Doors
Teddi of California, a women’s sportswear label that parlayed its early success in the 1960s as a women’s blouse company into a maker of misses staple items like polyester pullon pants, closed its doors on Dec. 5 after several creditors put the company in involuntary bankruptcy.
The bankruptcy filing follows a year of difficulties in which the decades-old manufacturer, based in Rancho Dominguez, Calif., lost its J.C. Penney account and had millions of dollars in chargebacks that eroded its bottom line.
Three Los Angeles unsecured creditors, The CIT Group; AISE Inc., known as Santa Fe Finishing; and Guilbert Tex, filed their claim in U.S. Bankruptcy Court in Los Angeles on Dec. 8, noting that Teddi owed them nearly $130,000, court documents showed.
In addition, Teddi Apparel owes its factor, Sun Trust Bank, $14 million, said attorney Benjamin S. Seigel of Buchalter, Nemer, Fields & Younger, the Los Angeles firm representing Sun Trust.
“There were signs the company wasn’t doing well,” Seigel said. “The dilution of their accounts receivable was very high. Their projections showed that they needed more funding than the bank was willing to give them, and they were unable to fund their operations going forward without that substantial influx of funding.”
A source close to Teddi said the company’s owner, Stephen Meadow of Walford Investments Inc., put up $1.7 million in life insurance to keep the company in business, but that Sun Trust decided not to go forward based on its projections on chargebacks.
In recent months, Teddi has been mired in a web of financial trouble and lawsuits.
“Since September last year, they ran into serious production problems,” said attorney Mark D. Brutzkus, whose firm, Ezra, Brutzkus and Gubner LLP in Encino, Calif., filed the involuntary bankruptcy claim. “They couldn’t get their shipping out in a timely manner. They ended up sustaining a $30 million chargeback in the fourth quarter of 2002. In addition, they lost their J.C. Penney’s business, which makes up about $30 million to $40 million of their business.”
Despite those hurdles, the company still turned a $5 million profit last year, Brutzkus said.
At the same time, the company’s longtime chief executive, Stuart Weiser, who had been with the apparel firm for 16 years, stepped down early this year. He was replaced a month later by Tom Beaver, Teddi’s former president of dresses. Beaver was not available for comment. Neither was the company’s attorney, Gary Freedman.
“When Weiser left they had $50 million with orders going forward,” Brutzkus said. “Between March of this year and two weeks ago, their business went into the toilet.”
Sun Trust was trying to renegotiate its factoring agreement with Teddi, but wanted Meadow to put up more cash collateral, Brutzkus said. “The company’s attorney, Gary Freedman, said we’re not going to do anything, but we will give you the keys,” Brutzkus said.
Former CEO Weiser said when he left the company, annual revenues were a little more than $100 million. Weiser is now consulting for Los Angeles misses manufacturer Graff Californiawear.
This summer, Teddi was hit with a trio of lawsuits. One lawsuit was for breach of contract filed by Compton, Calif.–based misses manufacturer Carol Anderson Inc. Anderson alleged that Teddi failed to meet quarterly payments totaling $6.5 million stipulated in a licensing agreement. Anderson’s writ of attachment was denied, sources said, but the dispute went into mediation. It is still unresolved. Fabric vendors Design Collection and Colorway Inc. filed lawsuits seeking payment for shipped goods totaling $350,000.
Sun Trust has called in the Buxbaum Group, a Los Angeles–area company that does asset appraisals, to do a liquidation analysis of Teddi’s assets.
According to attorneys and accountants, the firm’s employees have been paid and put on a two weeks’ sabbatical while things are worked out.
Teddi was founded in 1962 by Teddi and Sam Winograd after the couple moved to Los Angeles from New York. In 1976, the Winograds sold their share to Stephen Meadow. They stayed on with the company until 1987.
“Teddi hasn’t been doing well for years, despite what they say, and I’m sorry to hear that,” said founder Teddi Winograd. “Then they went young, young, young and forgot their customer.”
This year Teddi took a detour from its tried and true misses brands, carried in large department stores such as Robinsons-May, Catherine’s, Mervyn’s, Sears Roebuck & Co. and Filene’s, and veered into the direction of the younger customer and private-label business. Teddi dropped its Teddi line and replaced it with an updated sportswear label called T & Co., which stopped shipping in October. It also started a contemporary label called Strategy.
