Women’s wear direct-seller The Connaught Group will be sold for $22 million to a joint venture between Tennessee-based Tom James Company and Hong Kong’s Royal Spirit Group, following an April 5 bankruptcy auction in New York.The purchase price consists of $20 million in cash and the assumption of the lease for Connaught’s midtown Manhattan office space, relieving the company of a $1.9 million lease rejection claim. Royal Spirit Group, a clothing manufacturer that was Connaught’s largest creditor, will also waive its $5.4 million general unsecured claim.
As LCD reported, Connaught filed for Chapter 11 protection on Feb. 9, listing assets of $50.64 million against $61.3 million in liabilities.
The sale will close by April 19 at latest, according to an asset purchase agreement filed with the court on April 10. The Worth Collection, a fellow direct-seller of high-end women’s wear, was named back-up bidder for Connaught’s intellectual property, with a $7 million offer. Discount gift and home accessories chain Tuesday Morning will serve as the back-up bidder for the company’s inventory, with an offer of nearly $2 million.
According to a court filing by Consensus Securities, Connaught’s investment banker and financial advisor, the company received seven qualified bids, one of which was an offer to serve as a liquidation consultant, and another which purported to offer an alternative to the sale process.
Royal Spirit originally approached Consensus and Connaught about a potential restructuring, instead of a sale, but no agreement was ever reached, Consensus said. Tom James – “the world’s largest manufacturer and retailer of custom clothing,” according to its website – also spoke with Connaught about a potential sale prior to the auction process. The two joined forces on March 16, creating Forty-Three Eighty Company in order to submit the winning bid.
