Hong Kong-based fashion retailer Esprit Holdings has announced the voluntary bankruptcy filings of its US businesses due to poor financial conditions.

Esprit US Distributions and its direct wholly-owned subsidiary Esprit US Retail have filed for Chapter 7 of the US Bankruptcy Code. 

Under Chapter 7 filing, a company closes and sells off assets to pay creditors, compared with Chapter 11, which allows a company to reorganise while devising a plan to pay off its debts.

As of late June, the consolidated total assets and consolidated total liabilities of the businesses were approximately HK$317 million (US$40.8 million) and HK$477 million ($61.4 million), respectively.

The board of each US subsidiary believed the firms would not be able to generate sufficient revenue to cover high operating costs and fulfil debt obligations, given the poor financial conditions and unsatisfactory operational results.

Following the bankruptcy filings, Esprit Holdings will no longer have control over the US subsidiaries, and their financial results will be excluded from the company’s.

Esprit expects the proceedings to result in a substantial reduction in operational costs. It also plans to collaborate with partners to enhance and expand its asset-light licensing business.