Comvest Provides Karmaloop DIP Financing
Karmaloop began a formal restructuring as part of a §363 sale process. The company, subject to court approval, has secured debtor-in-possession DIP financing from a lending group led by Comvest Partners to support reorganization efforts and the forthcoming §363 sale process.
The Comvest-led lending group also submitted an offer to convert a portion of its debt to equity to own the business should no higher or better offer emerge through the Section §363 sale process. Karmaloop retained retail and consumer products investment bank specialist Consensus to assist in marketing the Company for sale.
The restructuring and new funding provides an opportunity to address existing debt that was incurred to support the launch of four new business divisions and development of television content between 2011 and 2013. Over time, these ventures proved not to be economically feasible and the debt that remained as a vestige of these past efforts was hindering working capital for the core business. The main property, Karmaloop.com, has continued to dominate the streetwear space, with more than 500 brands and close to 4 million monthly unique visitors.
“Comvest is a big believer in Karmaloop and we are excited to partner with management to restructure and grow the business,” said Daniel Lee, managing director of Comvest Partners. “The Karmaloop team has built a unique, market-leading platform through its 15-year history, and will now be poised to continue building the company without the strain of debt.”
Karmaloop CEO and Founder Greg Selkoe said, “The Karmaloop brand is solid and powerful, we simply have been carrying too much debt from past ancillary business startups that were discontinued. We’re excited to be able to restructure Karmaloop to focus on and enhance our core business strategy and continue to execute on our plans for profitability. This restructuring will assist with our strategic move to vendor direct.”
CEO Michael O’Hara said, “Karmaloop provides a buyer with the unique opportunity to immediately gain access to an established online platform with real scale that has an unusually passionate customer base. Karmaloop has few if any direct competitors, and its core demographic is increasingly influential and affluent.”
Karmaloop filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. The company received an investment of $3 million led by Comvest Partners along with co-lender CapX Partners to support the restructuring.
Founded in 2000 Karmaloop is a cross-platform lifestyle ecommerce and media site selling hard to find and unique streetwear brands selling footwear, apparel and accessories to 18-35 year old (primarily male) consumers.