Certain brand names are strong enough to survive
multiple trips through bankruptcy court. Frederick’s of
Hollywood is an example. The brand was positioned
at the racier end of the lingerie spectrum and was the
biggest player in the $13 billion lingerie business for
decades. Despite founder Frederick Mellinger’s motto,
“sex never goes out of style,” Frederick’s couldn’t
keep up with nimble rivals like Victoria’s Secret even
as Mellinger turned up the heat by expanding into
sex toys and engaging celebrities like Madonna and
Pamela Anderson to wear Frederick’s lingerie.
Following a leveraged buyout in 1997, which
loaded the company with nearly $100 million in debt,
Frederick’s filed for Chapter 11 in 2000. By the time
Frederick’s filed Chapter 22 in 2015 with debt of $106
million, its chain of 200 stores had shrunk to a handful.
Yet the brand held value, and it was purchased for
$22.5 million by Authentic Brands, which acquired
the trade names, e-commerce site and some inventory.
Authentic Brands most recently bought Aéropostale
in a 363 sale, and also owns once troubled brands
Airwalk and Hart Schaffner Marx.
Trouble in Toyland
For decades, toy retailer FAO Schwartz’s Fifth
Avenue store in Manhattan was a magnet for tourists.
Schwartz was immortalized in the 1988 blockbuster
movie, Big, where Tom Hanks danced on the floor
piano. In January 2003, the retailer made a quick trip
through bankruptcy court, emerging in April 2003.
By December 2003, Schwartz did a Chapter 22, with
investment group D.E. Shaw winning the 363 sale. In
2008, D.E. Shaw sold the retailer to Toys “R” Us, who
put FAO Schwartz boutiques into some of its stores. In
2015, Toys “R” Us closed all Schwartz stores, including
the iconic flagship store.
Airwalk Shoes is a brand that has success-
fully ridden the bankruptcy rollercoaster. It was a
hot shoe brand in the 1990s, appealing to the fickle
teen marketplace. Its high water mark for revenues
was around $240 million in 1997. In 1999, Sunrise
U.S. economy is made up more and more of service
companies, so the broad answer is yes. We both have
no choice if we want to play at all and there are some
strong service companies with very sticky streams of
revenue that prop up the brand name for longer and
Some recent bankruptcies provide color on brand
loan recoveries. In the case of the bankruptcy of Radio
Shack in 2015, lenders realized 160% of the orderly
liquidation value recovery that was projected when
the asset-based loan was booked in 2013. Across the
pond in 2014, the bankruptcy recovery for lenders in
the Netherlands-based retailer MEXX was midway
between the OLV and the Forced Liquidation Value for
the European intellectual property. In 2014, Talbots
bought the Coldwater Creek apparel brands in bank-
ruptcy court, generating a recovery for lenders that was
in line with expectations. The recent liquidation of The
Limited stores was an interesting case. This retailer did
a quiet out-of-court liquidation of its inventory, then
filed bankruptcy with a $25.75 million floor price for its
brand names and related e-commerce assets.
“Technology is facilitating lenders’ understanding of the value of brands. Today, valuing a brand is mostly science, not art,”
— David Peress, Executive Vice President, Hilco Streambank