BP Clothing, the Los Angeles–area apparel company that, until recently, held the license to make Baby Phat clothing, primarily for Wal-Mart, filed for Chapter 11 bankruptcy protection.
The company, located in Commerce, Calif., filed bankruptcy papers on Dec. 12 in U.S. Bankruptcy Court in New York.
BP Clothing, founded in 2003 by Steven Feiner along with Scott London and investment company Steel Partners, listed $57.4 million in assets and nearly $94 million in debt.
The list of creditors reaches far into the apparel and finance worlds. The top three secured creditors were Guggenheim Corporate Funding, owed $58 million; MVC Capital Inc., owed $24 million; and First Capital factors, owed $3.7 million.
Others on the list to collect money included Majestic Realty, operators of the company’s former warehouse. Majestic is in line to collect $272,377. Foyal Garment Co., based outside of Chicago, said it is owed nearly $200,000. Pacific Continental Textiles of Rancho Dominguez, Calif., has a claim in for $145,000.
Tough economic times, falling apparel prices and skyrocketing cotton prices have challenged the company that once occupied a 111,400-square-foot warehouse in Pico Rivera, Calif., until it could no longer pay the $65,000 monthly rent.
Recently, BP Clothing moved to a 13,000-square-foot facility in Commerce and is renting a warehouse to hold its stock, the company said in court papers.
As an example of its financial hardship, the apparel venture rolled out a slew of statistics showing its revenues in fiscal year 2010 declined to $89 million after hitting high marks of $101 million in 2009 and $132.8 million in 2008.
According to court papers, the company has been battling a cash-flow problem that hampered its ability to finance its Baby Phat production. Subsequently, BP Clothing early this year lost its license to sell Baby Phat clothing to Wal-Mart.
Currently, the only label BP Clothing is selling to Wal-Mart is its own Susie Rose line of apparel.
The idea is for the company, which employs 42 people and uses eight contractors, to quickly exit bankruptcy with a plan supported by its creditors, who may end up receiving equity in the company as opposed to receiving money.
“We are attempting to repair the balance sheet and reorganize around the current licenses we own,” said Michael Fox, BP Clothing’s bankruptcy attorney. He noted that the company is still up and running.
According to court papers, “The debtor seeks to efficiently reduce the substantial debt burden that hinders its ability to effectively compete in a competitive market that has been challenged by overall economic conditions. A successful restructuring will allow the debtor to concentrate its resources on generating revenue and expanding market share.”
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