### Retailer Liberated Brands Fails to Overcome Bankruptcy Hurdles

In the competitive retail industry, licensing brands can be a risky endeavor, as evidenced by the recent struggles of Liberated Brands. The company, which licensed popular names such as Quiksilver, Billabong, and Roxy from Authentic Brands Group, filed for Chapter 11 bankruptcy protection on February 2. This move followed Authentic Brands Group's decision to terminate its licensing agreement with Liberated in December.

Facing the daunting challenge of bankruptcy, Liberated Brands sought to "implement an orderly monetization and disposition of its businesses," according to a press release. The company was transitioning its brand licenses to new holders to ensure continuity and future success. Despite these efforts, all 100-plus stores remained open temporarily to conduct going-out-of-business sales.

The Chapter 11 process, expected to be financed by JP Morgan, was intended to support ongoing commitments to customers, employees, and partners, including the payment of wages and benefits. However, the anticipated proceeds from the liquidation sales fell short. Liberated Brands managed to earn approximately $65 million from the asset sales, failing to cover its obligations to secured creditor JP Morgan.

As a result, the company's Chapter 11 bankruptcy filing was dismissed by a judge. The shortage in proceeds means that JP Morgan will not recover the full amount owed, and unsecured creditors, such as suppliers and service providers, will receive no payments. According to Shop Eat Surf Outdoor, Liberated Brands still needs to collect $27 million but foresees a shortfall of $22.1 million in DIP claims and $5 million in ABL adequate protection claims.

During the court hearing, Matthew Fagen, the restructuring partner at Kirkland & Ellis LLP representing Liberated, acknowledged the financial deficit. Despite objections from one of Liberated's creditors, its payroll company, the judge ordered that any remaining funds go to JP Morgan, leaving other creditors unpaid.

This development underscores the challenges and risks inherent in the retail business, particularly when relying heavily on licensed brands.