La Senza denies it is insolvent as supplier tries to force Ch. 7 #SmallBiz - The Entrepreneurial Way with A.I.


Thursday, February 6, 2020

La Senza denies it is insolvent as supplier tries to force Ch. 7 #SmallBiz

Dive Brief:

  • In court papers, lingerie retailer La Senza took issue with an involuntary bankruptcy request filed against it by suppliers seeking to have it put in Chapter 7 and liquidated under a trustee.
  • Attorneys for the retailer alleged that "there is evidence that [MGF Sourcing] filed these involuntary petitions in bad faith." The company said that the two suppliers that filed along with MGF were "not actually creditors" to La Senza and had never invoiced La Senza directly.
  • La Senza, formerly owned by L Brands, also suggested that MGF filed bankruptcy papers against La Senza "to obtain a tactical advantage" in a New York state lawsuit brought by the supplier over nonpayment and breach of agreement.

Dive Insight:

The two parties have disputed in court papers the content of an agreement struck after retail conglomerate L Brands, owner of Victoria's Secret, sold La Senza to the private equity firm Regent LP in 2018. That agreement is at the heart of both the New York lawsuit and MGF's claims in its Ch. 7 filing against La Senza. La Senza has filed its own counterclaims under the agreement and denied that it is insolvent.

Among other matters in dispute, MGF claims L Brands guaranteed payments for La Senza purchases from the supplier, while La Senza denied in the New York case that there were guaranteed payments. Specifically, MGF alleged in its initial filings that L Brands was to guarantee $20 million worth of orders placed by La Senza between June 2019 and May 2020. MGF has also alleged that the retailer owes L Brands money.

MGF and two other suppliers filed the involuntary bankruptcy papers against La Senza in late January in both Canada and federal court in Delaware. In the U.S., the suppliers claimed the retailer owed them a total of more than $9 million. According to an MGF official, La Senza breached key aspects of an agreement with the company to source products shortly after L Brands sold the banner, which La Senza denies.

The supplier kept shipping goods to La Senza, as the lingerie seller was up to date on payments for the actual goods it ordered. That ended in October, when MGF alleged La Senza became delinquent on $10 million in goods. 

The supplier said that by November "it became clear that La Senza had no intention of curing its breaches" of the agreement, or paying for its goods, or sharing information with MGF to provide financial assurance. At the time of the court filing, the supplier alleged La Senza was delinquent on over $41.7 million of payments for goods in all.

A judge on Monday denied MGF's request to speed up document production in the bankruptcy case. Along with detailed financial information, MGF has requested documents from La Senza around its sale by L Brands related to any possible transfer of money or other items of value from La Senza to Regent or L Brands.

via by Ben Unglesbee, Khareem Sudlow