BP Clothing Files for Bankruptcy
BP Clothing, the former Baby Phat apparel line licensee has filed for chapter 11 bankruptcy protection. The Los Angeles apparel company, which is located in Commerce California, held the license to produce the celebrity endorsed Baby Phat clothing line for stores such as; Walmart, and JcPenny until recently. Scott London, Steven Feiner, and investment company Steel Partners founded BP Clothing, in 2003. On December 12th, the company filed for bankruptcy in a U.S. Bankruptcy Court in New York.
BP Clothing’s venture was formed around the Baby Phat brand, which was created by Russell Simmons, a music executive and co-founder of the Def Jam music label, and his model wife, Kimora Lee Simmons. The couple is now divorced, but some of their celebrity friends like, Tyra Banks’ endorsement of the brand helped the clothing line become one of the most sought after clothing lines on the market. Like many other businesses in Los Angeles and across the country, BP Clothing has felt the effects of our current economic climate. The clothing line attributed difficult economic times, as well as escalating cotton prices for their financial downfall. Unable to pay the $65,000 a month rent of their 111,400-square-foot warehouse, the company has moved it’s stock to a 13,000-square-foot facility in Commerce California.
To demonstrate the extent of their financial hardships, BP Clothing showed the court their financial statistics from 2010, 2009, and 2008. These statistics displayed that the clothing line’s revenues had declined to $89 million in 2010. This was a considerable decrease from 2009’s $101 million revenue and 2008’s $132.8 million. Court papers reveal that a cash-flow problem has impeded its ability to finance Baby Phat’s production. This money problem cost BP Clothing its license to sell Baby Phat clothing to Wal-Mart. The clothing company listed $57.4 million in assets and approximately $94 million in debt in their court papers. The top three secured creditors listed were Guggenheim Corporate Funding, owed $58 million; MVC Capital Inc., owed $24 million; and First Capital factors, owed $3.7 million.
“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.
“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.” The company stated in court papers.
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