A New York bankruptcy judge approved fashion house BCBG Max Azria Group Inc.’s Chapter 11 plan Tuesday while rejecting founder Max Azria’s wife’s claim for a $7 million golden parachute.
At a hearing, U.S. Bankruptcy Judge Shelley C. Chapman disposed of what the BCBG said was the last unresolved objection to the plan to sell the company’s intellectual property, stores and other assets to two separate companies while rejecting the argument that Lubov Azria’s post-bankruptcy termination gave her an administrative claim for the termination payment in her prebankruptcy employment contract.
The fashion house, founded by Max Azria in 1989, had filed for Chapter 11 protection in March with the hope of restructuring more than $500 million worth of debt.
Over the past three decades, the high-end purveyor of womenswear grew to more than 550 stores across the U.S., Canada, Europe and Japan. After years of success, the company saw a downturn in net sales over the past few years, declining more than 20 percent since 2014 to approximately $615 million in the most recent fiscal year, according to court documents.
The Chapter 11 plan approved by the court calls for New York-based Marquee Brands, a brand acquisition, licensing and development company, to acquire the rights to BCBG’s intellectual property for $108.1 million, while Hong Kong-based apparel, footwear and fashion accessories company Global Brands would take over marketing, sale and distribution of BCBG brands along with the debtor's wholesale operations, online sales platform and 42 standalone brick-and-mortar locations for $23 million.
BCBG creditor Allerton Funding LLC will receive a junior interest in the intellectual property royalties until the $55 million in loans Allerton made to BCBG are paid off. Creditor Guggenheim Partners is to receive $1.75 million and the unsecured creditors $900,000.
BCBG attorney Joshua Sussberg of Kirkland & Ellis LLP told the court the plan will insure then business will continue to operate.
“Everyone's wearing BCBG, and everyone will continue to wear BCBG,” he said.
Judge Chapman overturned the last objections by the U.S. trustee to the release and exculpation provisions and approved the plan.
Sussberg said all other plan objections had either been dropped or resolved, or are in the process of being resolved, including one by the Azrias arguing the plan that does not allow certain impaired creditors like themselves to opt out of releasing affiliated third parties like secured lender Guggenheim Partners from fallout litigation. He said the plan was amended to exclude the Azrias from the releases.
Judge Chapman also heard attorneys for Lubov Azria, who has been chief creative officer of the company and was terminated just after the bankruptcy filing, argue Tuesday for a $5 million claim against the bankruptcy estate. She sought the payment based on a termination clause in her employment agreement, but in April Judge Chapman said the company could cancel the contract.
However, in a filing last week the Azrias argued that because she was fired as part of headcount reductions after the bankruptcy the payment constituted post-petition severance pay and was an allowed administrative expense.
At the hearing Sussberg countered that the payment was based on a prepetition contract and that there was “zero question” that is was a general unsecured claim, and Judge Chapman ruled in favor of BCBG's objection to the claim.
“Despite spending the entire weekend on this case I don’t see anything that supports your argument,” she said while quizzing the Azrias’ attorneys during the hearing.
BCBG is represented by Joshua A. Sussberg, Christopher Marcus, James H.M. Sprayregen and Benjamin M. Rhode of Kirkland & Ellis LLP.
The Azrias are represented by Thomas E. Patterson, Robert J. Pfister and Sasha M. Gurvitz of Klee Tuchin Bogdanoff & Stern LLP and Martin D. Singer and Todd S. Eagan of Lavely & Singer PC.
The U.S. trustee is represented by Brian S. Masumoto of the U.S. Department of Justice.
The case is In re: BCBG Max Azria Global Holdings LLC et al., case number 1:17-bk-10466, in the U.S. Bankruptcy Court for the Southern District of New York.
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