True Religion Apparel, Inc. – L.A. Fashion Jeans Manufacturer Files for Chapter 11 for the Second Time in 30 Months Citing “Liquidity Constraints, Accelerated by the COVID-19 Pandemic”

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[Developing story] April 13, 2020 – True Religion Apparel, Inc. and four affiliated Debtors (“True Religion” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case number 20-10941. The Debtors, an American clothing manufacturer with a focus on premium denim, are represented by Justin R. Alberto of Cole  Schotz P.C. Further board-authorized engagements include (i) Akin Gump Strauss Hauer & Feld  LLP as general bankruptcy counsel, (ii) Province, Inc. as financial advisors, (iii) Retail Consulting Services, Inc. as real estate advisor and (iv) Stretto as claims agent.

The Debtors’ lead petition notes between 5,000 and 10,000 creditors; estimated assets between $100.0mn and $500.0mn; and estimated liabilities between $100.0mn and $500.0mn. Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) OA S.A. C.V. ($6.9mn trade debt), (ii) Lya Group ($3.4mn trade debt) and (iii) DHRUV Glogal Ltd. ($3.3mn trade debt). All 30 of the Debtors' top 30 unsecured creditors are trade creditors holding claims of at least $200k.

For the Debtors, whose website is appropriately featuring "Throwback Vibes" at up to 70% off (albeit with the call center closed), this is a "Chapter 22," having emerged from bankruptcy only 2 and a half years ago with a skinny $113.5mn of funded debt (a reduction of $358.0mn).

Events Leading to the Chapter 11 Filing

In documents filed with the Court, the Debtors stated: "The Debtors have today filed the Chapter 11 Cases amid an unprecedented health crisis with difficult social, political and economic implications. While the Debtors would have preferred to wait-out the current instabilities of the financial markets and retail industry generally, they simply could not afford to do so.  Existing liquidity constraints, accelerated by the COVID-19 pandemic and the attendant government stay-at-home orders and edicts that locked the Debtors out of all their brick-and-mortar retail locations, and the hundreds of brick-and-mortar locations of the Debtors’ wholesale business customers, precipitated the Debtors’ difficult decision to furlough all non-essential employees and commence these cases as the only available means to maximize value for their various stakeholders. 

About the Debtors

According to the Debtors, "In 2002, True Religion emerged onto the Los Angeles denim scene by blowing up the construction of the classic five-pocket jean. Industry-standard sewing machines couldn't handle our designs, so we broke them apart and rebuilt them to produce our one-of-a-kind vision. With its five-needle thread at two-stitch-per-inch process, our Super T stitch was instantly recognized for style that was unlike any other denim brand in the world."

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