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Global Brands Group euthanised with negative equity of US$1.79 billion

Fiorelli has been sold to Centric Brands.

Global Brands Group – Fung Group’s failed international brand-management spinoff – has finally been euthanised. 

The Hong Kong-listed company announced in a stock exchange filing that it will seek to have the company wound up in its Cayman Island domicile of registration tomorrow after failing to convince it could repay long-suffering lenders and trade creditors. 

The move follows an updated unaudited loss of $2.08 billion for the year to March 31 and the collapse of its UK and German subsidiaries. 

A raft of moves all included in the announcement include the group’s UK operations being placed into pre-packaged administration on November 1, and the German subsidiary placed in administration. 

The Fiorelli brand was sold on November 2 to Centric Brands for US$3.32 million, however, the group had already written off its entire value, resulting in the sale price representing a net gain for the business which has been applied to reducing bank debt. 

In the six months to September, Global Brands Group lost $99 million on turnover of $173 million. It lost $44 million in North America (where its operations are already in Chapter 11 administration), and $59 million in Europe, but achieved a surplus of $5 million in its brand management division, listed separately in the accounts. 

In both Europe and North America, Global Brands Group was unable to purchase inventory because vendors would no longer supply goods without being paid for stock already shipped. The American business was also impacted by the termination of a master license agreement in June. 

In Europe, the company operating costs for the six months rose by 129.5 per cent to approximately US$64 million due to higher shipping costs related to container shortages and increased air freight use “caused by production delay in light of late payments to vendors,” and higher salaries compared to last year when most staff were furloughed.

At the end of September, Global Brands Group sold the Ely & Walker footwear business, including the Ely Cattleman, Cumberland Outfitters and Ely Plains brands, for $750,000, representing a $40,000 gain on book value. Negotiations over the sale of the Air Brands, Sean John, and Juniper brands are ongoing and are expected to be concluded this month. 

In the stock-exchange filing signed by chairman William Fung the company said that since the sale of the Spyder Korea business in June, the proceeds of which were used to reduce bank debt, the company has been trying to preserve and realise value from its assets, while attempting to develop and agree on a restructuring plan with lenders, creditors and potential investors. 

Such a deal would have included fresh equity injection from prospective investors into the company, along with certain existing shareholders, into the group’s brand-management business. 

However, the embattled company was unable to secure support from lenders to any of the proposals it presented. 

In an unaudited balance sheet dated March 31, Global Brands Group listed assets of $317 million and total negative equity of $1.79 billion. 

Trading in Global Brands Group shares has been suspended since July 2.

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