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August 30, 2023 – Benitago Inc. and 28 affiliated debtors; together “Benitago” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Southern District of New York, lead case No. 23-11394 (Judge Sean H. Lane). The Debtors,"an e-commerce brand incubator and aggregator [ie, an Amazon seller aggregator]" are represented by Kyle J. Ortiz of Togut Segal & Segal LLP. Further Board authorized appointments include: (i) Portage Point Partners as financial advisors (and providing a CRO) and (ii) Stretto Inc. as claims agent.
The Debtors’ lead petition notes between 200 and 1,000 creditors; estimated assets between $50.0mn and $100.0mn; and estimated liabilities between $50.0mn and $100.0mn. Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) Stefana – Veronica Sticlaru and Adrian Sticlaru ($1.5mn contingent debt claim), (ii) CalMyotis (HK) Limited ($1.4mn contingent, disputed debt claim ) and (iii) Wang Fang ($477k contingent trade claim).
Benitago is part of a packed field of Amazon aggregators that benefitted from the COVID-driven growth in online retail long enough to attract huge amounts of start-up/venture capital, but now apparently looking at an imploding/exploding bubble as boom turns to bust. See here, here and here for background.
Events Leading to the Chapter 11 Filings
The Debtors, like many e-commerce companies, have been severely impacted by macroeconomic forces dictated by whipsawing consumer preferences during an unprecedented and unpredictable, once-in-a-lifetime global pandemic. Although it is clear now that the growth that the Debtors experienced during the early stages of the COVID-19 pandemic is unsustainable in a post-pandemic consumer climate, the Debtors remain a viable and innovative business that is sustainable (after addressing the current liability overhang) on a reduced scale with more measured growth. Prior to acquisition of the Inorganic Brands, the Debtors were consistently profitable and the Debtors had multiple profitable quarters prior to entering into the CoVenture Loan Agreement.
Beginning in 2020, the Debtors experienced explosive growth fueled in large part by a shift in consumer habits toward online purchasing during the early lock-down stages of the COVID-19 pandemic. With the success and growth of the Debtors’ in-house developed Organic Brands, the Debtors raised significant funds through two separate capital raises in February 2021 and November of 2021 from, among others, CoVenture, to acquire the Inorganic Brands and expand the business. Unfortunately, by the end of 2021—and after the acquisition of several new Inorganic Brands—consumer habits began to shift back to pre-pandemic purchasing behavior.
These negative trends accelerated in early 2022. By May 2022, the Debtors’ largest competitor, Thrasio (which had been valued in 2021 between $5 billion and $10 billion) collapsed, eroding market confidence in the entire sector and setting off a flight of capital as financing opportunities evaporated. With the Debtors’ existing financing priced upon 2020 and 2021 growth expectations that proved unrealistic in light of market changes, the Debtors found themselves unable to generate sufficient revenue to service the debt used to fuel acquisition of the Inorganic Brands during the Debtors’ growth phase. Consequently, by the middle of 2022, the Debtors were forced to approach CoVenture regarding waivers and, eventually, a restructuring of the debt or a sale of certain assets to address the quickly changing economic reality.
About the Debtors
According to the Debtors: “Benitago Group (Benitago) is an e-commerce brand incubator and aggregator focused on creating and acquiring brands hyper-optimized for sustainable growth on e-retailer marketplaces such as Amazon. Founded in 2016 by Amazon seller natives, Benitago has launched over 10 brands and 300 products in-house. Along with brand incubation, the company connects with self-starting Amazon business owners looking to sell and grow their businesses."
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