In May 2020, Gordon Brothers provided Brooks Brothers with $32.5 million in financing, secured by unencumbered intellectual property to help meet the Company’s liquidity needs. The bridge facility, completed during the COVID-19 pandemic, allowed Brooks Brothers a longer runway and more time to adequately consider options for its stores, formulate a restructuring plan and explore a potential buyout, before eventually filing for bankruptcy in July.
Gordon Brothers was able to provide the loan based on its strong balance sheet as well as its cross-functional expertise in brand valuation, asset monetization and store operations. The firm’s deep understanding of the retail sector allowed it to determine the value of Brooks Brothers’ intangible and tangible assets and to identify a creative approach to help the retailer manage extraordinary challenges.
Brooks Brothers, primarily owned by the family of Chairman and CEO Claudio Del Vecchio, is the oldest apparel retailer in the U.S. with an operating history of nearly two centuries. The company grew to more than 1,400 locations in over 45 countries, including retail and factory outlet stores selling apparel, accessories, bedding, personal care items and other products.
However, within the last decade sales have been hindered by changing consumer tastes away from Brooks Brothers’ more formal style, operational challenges and general unfavorable trends in the apparel industry. Brooks Brothers began to explore strategic options in 2019, but the pandemic interrupted these efforts and created much more severe liquidity and operational hurdles.
Due to the coronavirus, the company had to close nearly all its stores—51 of them permanently—and with revenues falling more than 70 percent from March to June, Brooks Brothers also furloughed employees and sought deferrals for payments to suppliers. Additionally, the company needed new sources of liquidity, as lenders decreased the size of an existing asset-based loan facility and funding from the U.S. Coronavirus Aid, Relief, and Economic Security (CARES) Act was not made available to Brooks Brothers.
The New York-based company began accepting competitive bids from potential lenders to supply the needed funding. Gordon Brothers was selected to implement a $20 million loan facility that offset some of the company’s cash burn and gave them more time to determine a way forward. An additional $12.5 million loan was later provided by Gordon Brothers, allowing Brooks Brothers to continue operating and obtain a debtor-in-possession (DIP) facility. The DIP loan was eventually used to repay Gordon Brothers.