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Brooks Brothers Receives Bankruptcy Loan Without Interest Rate News and analysis

NEW YORK, United States – Competition for retailer Brooks Brothers Group Inc. to buy, the company will be able to fund its bankruptcy reorganization with a $ 80 million loan with no interest and no closing costs.

ABG-BB LLC, a partnership between Authentic Brands Group LLC and mall landlord Simon Property Group Inc., will provide the loan. The generous terms reflect competition between that group and WHP Global, a brand-buying company backed by ailing debt giant Oaktree Capital Management LP, Garrett Fail, the retailer’s attorney said at a court hearing on Friday.

“I am confident that the terms will be the best that can be achieved,” said US bankruptcy judge Judge Christopher Sontchi at the company’s first hearing, which was conducted over the phone.

Sontchi said he would sign an order that would initially allow the company to borrow $ 60 million. The company will return to court in the coming weeks to obtain permission to withdraw the rest of the money, which will be used to fund the business as Brooks Brothers tries to find a buyer.

Before filing for bankruptcy, Brooks Brothers had arranged a $ 75 million DIP loan from WHP Global, owner of the brands Joseph Abboud and Anne Klein. The new loan will bring in $ 80 million, eliminate an early redemption penalty and give the company more time to close a sale as part of the bankruptcy case, Fail said.

Lenders who provide so-called debtor loans often have an advantage when trying to buy a business from bankruptcy. Such loans almost always have a higher interest rate than a non-bankrupt company would be charged.

“This is a very favorable, if not unprecedented, economic downturn,” said Kelley A. Cornish, attorney at ABG-BB, LLC, the name of the joint venture between Authentic Brands and Simon Property.

Brooks Brothers will host a court-supervised auction in the coming weeks that should attract a lot of competition, Fail said

“We have had active conversations with multiple bidders,” said Fail.

As it struggled to restructure out of court, the company closed 51 stores and ceased production in Massachusetts, North Carolina, and New York. When Brooks Brothers went bankrupt on July 8, only 18 stores were open in the United States. The company has 1,400 locations in 45 countries. Due to the pandemic, the company has fired 4,025 employees.

By Steven Church