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Global Brands Group is technically insolvent, despite latest asset sale

Katy Perry in a publicity shot when she formed a partnership with Global Brands Group.

Embattled Global Brands Group has completed the sale of its Spyder business to a Korean investor netting US$19.5 million – and issued a warning to investors that there was a question mark over its ability to continue to trade as a going concern. 

In a stock exchange filing this morning, chairman William Fung said the company’s liabilities exceeded its assets by US$899 million at the end of September. Trade payables to external creditors and related companies which have become past due, together with accrued interest, amounted to $851 million and the company is in breach of its financial covenants relating to a syndicated loan of $174 million. 

“Certain conditions, including those described above, indicate the existence of material uncertainties which may cast significant doubt about the group’s ability to continue as a going concern,” the filing said. 

“The company has been pursuing a number of measures to generate adequate financing and operating cashflows with the aim of ensuring that the group continues as a going concern.”

Fung blamed the Covid-19 pandemic, “geopolitical uncertainties” and “structural shifts in the retail industry” for the company’s plight, but Global Brands Group has been losing money for years. Last July it reported a loss of $598 million in the year to March which followed a loss of $400 million the year before.

It has undergone multiple restructures and sold off assets in a bid to stem the losses.  

A core purpose of today’s stock exchange filing was to advise shareholders of a possible change in the use of the proceeds from the Spyder sale, redirecting it to funding ongoing operations rather than using it to pay down debt. 

Fung said the company’s board is considering various debt-restructuring options including the potential sale, disposal or restructuring of assets within the group in order to reduce its indebtedness and ensure a sustainable balance sheet in the long term.

Global Brands Group was originally created as a division of Li & Fung to manage private-label brands in 2005. It was subsequently spun off and listed on the Hong Kong stock exchange in 2014. Later that year it formed a joint venture with footballer and celebrity David Beckham to develop Seven Global to manage the Beckham brand across various categories and in 2016 it formed a partnership with singer Katy Perry. 

The company’s current stable of brands under ownership, licencing or management include Aquatalia, Frye, Ellen Tracey, Marvel, Sean John, Allsaints and Katy Perry. 

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