Global Brands Group has applied to be placed in provisional liquidation ahead of an anticipated US$1.3 billion non-cash loss and a further $222 million operating loss.
The losses are largely related to its US division which is currently under Chapter 11 bankruptcy protection.
John C. McKenna of Finance & Risk Services has been named as provisional liquidator of the Bermuda-registered, Hong Kong-listed company, subject to confirmation at a hearing this Thursday.
Chairman William Fung said in a stock-exchange filing that the appointment of a liquidator would “facilitate a holistic financial restructuring of the group and preserve the assets and value of the company”.
However, given the size of the latest paper loss – the $1.3 billion covering impairments of intangible assets including goodwill, right-of-use assets and property, plant and equipment, the write-off of deferred tax assets, and provision for other assets in light of their potential sale during the Chapter 11 process – it is unclear what asset value remains.
Fung said Global Brands’ board believes that the appointment of the provisional liquidator is “essential and desirable for the company’s financial restructuring efforts” in order to afford the best chance of successfully restructuring the business and to prevent creditors lodging claims against the company.
He said the board would work alongside the liquidator to implement a group-wide debt restructuring plan and so that “the assets of the group can operate to generate revenue as a whole instead of being subject to a fire sale at a significant discount”.
“The company will explore various restructuring options for the group including the raising of cash for the company from third-party investors through an equity issue or certain asset disposals and/or debt restructuring that may involve refinancing and/or a compromise or arrangement of debts and liabilities of the group.”
Trading in the company’s shares has been suspended since July 2.