Centric Brands entered into a restructuring support agreement with substantially all of its secured lenders, led by certain funds managed by Blackstone, Ares Management, and HPS Investment Partners, to recapitalize the company, provide $435 million in debtor-in-possession financing and allow the company to operate without interruption throughout the restructuring process.

Additionally, the agreement contemplates an emergence from the process with a plan to reduce Centric’s funded second lien indebtedness by approximately $700 million. As part of the agreement, Centric voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York, White Plains Division.

Centric intends to continue operating in the ordinary course. The debtor-in-possession financing will enable the company to continue to meet its financial obligations throughout this process to employees, licensors, suppliers and vendors. Upon completion, Centric plans to emerge from the reorganization as a private company, under the ownership of its current lenders.

“Today’s agreement marks the beginning of our next chapter as an even stronger company and builds upon our progress to date executing on our long-term strategy. I am honored that Centric Brands’ lender group has such strong confidence in our team. Their partnership and support will enhance our ability to continue to grow our business, providing best-in-class design with an unmatched sourcing network, retail partnerships, industry expertise and deep relationships with licensors,” Jason Rabin, CEO of Centric Brands, said. “The current crisis has significantly impacted companies across all sectors. The pandemic disrupted many of our wholesale accounts’ ordering and constrained our cash flow. However, we are confident that with added flexibility in our capital structure, we will be well-positioned for long-term success during this period and beyond. We thoroughly evaluated all possible strategic options to address this environment. After extensive review, we determined that partnering with our current lenders to pursue this path will result in a stronger financial position and more resources to support future growth, while allowing us to focus on serving key stakeholders.”

Under the terms of the restructuring support agreement, Centric expects to emerge from Chapter 11 as a private company. Blackstone will exchange second lien debt for equity interests in the reorganized company. Existing senior lenders Ares and HPS will retain their senior loan positions and will receive equity interests in the reorganized company.

“Our lenders understand the company’s growth plan and have a productive and trusted working relationship with its management team,” Rabin said. “Centric Brands is looking forward to benefiting from their capital, strategic insight, global relationships and support.”

For a majority of its operations, the Chapter 11 process will not impact the company’s decision to reopen relevant locations.

“This financial restructuring process will allow us to optimize our operations while maintaining our valued, long-standing relationships with our business partners,” Rabin said. “We look forward to welcoming our employees and customers back as soon as it is safe to do so.”

Ropes & Gray, Dechert, PJT Partners and Alvarez & Marsal served as legal, financial and restructuring advisors, respectively, to Centric Brands.

The restructuring plan is subject to satisfaction of certain customary conditions, including approvals by the bankruptcy court. If the restructuring transactions contemplated by the restructuring support agreement are consummated, the company’s existing common stock will be extinguished and the holders of the common stock will not receive any consideration, consistent with legal priorities.

Centric Brands is a lifestyle brand collective that designs, sources, markets and sells products in multiple segments, including kids, men’s and women’s apparel, accessories, beauty, and entertainment.