Fashion Forward Financing: Looking to Banks and IP for the Next Trend
Various debt-burdened retailers are looking to their intellectual property assets as a source of untapped value for refinancing transactions. While it remains to be seen which strategies will be most successful, IP assets will play a key role in future retail restructurings. As the value of brick-and-mortar "hard" assets stores becomes tapped out, a retailer's brands, licenses, and associated IP rights may present reliable sources of value.
September 26, 2017 at 12:00 AM
15 minute read
As consumer preferences continue to evolve with the growth of electronic and mobile commerce, retailers are facing many new challenges, often struggling to survive. To withstand today's retail environment, some retailers need to evaluate an operational and/or financial restructuring, review and adjust their business models, and to improve liquidity, deleverage their balance sheets to reduce overall debt.
Various debt-burdened retailers are looking to their intellectual property assets as a source of untapped value for refinancing transactions. While it remains to be seen which strategies will be most successful, IP assets will play a key role in future retail restructurings. As the value of brick-and-mortar “hard” assets stores becomes tapped out, a retailer's brands, licenses, and associated IP rights may present reliable sources of value.
J. Crew: A Bellwether For IP-Driven Refinancing
Companies and investors alike are keeping an eye on recent high-profile IP-driven refinancing transactions, most particularly by J. Crew, whose restructuring and corresponding IP transfers are the subject of pending litigation. See Eaton Vance Mgmt. v. Wilmington Sav. Fund, No. 654397/2017 (N.Y. Sup. Ct. complaint filed June 22, 2017). In December 2016, the clothing company assigned rights in certain of its trademarks—including its quintessential J.CREW mark—to an unrestricted subsidiary, effectively eliminating an upcoming maturity. The transferred marks were subsequently pledged by the unrestricted sub to back new notes issued as part of a restructuring transaction.
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