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Following a legal stoush with Bank of America, the COVID-19 pandemic, and the exit of founder Carolyn Rafaelian as CEO, Alex and Ani – once valued at $US 1 billion – has now filed for Chapter 11 bankruptcy as it attempts to restructure its debt obligations.
Following a legal stoush with Bank of America, the COVID-19 pandemic, and the exit of founder Carolyn Rafaelian as CEO, Alex and Ani – once valued at $US 1 billion – has now filed for Chapter 11 bankruptcy as it attempts to restructure its debt obligations.

Alex and Ani troubles continue: company files for bankruptcy

Alexi and Ani, the high-profile US jewellery brand, has filed for Chapter 11 bankruptcy protection. The company, which has been plagued by controversy for many years, hopes to be able to sell most of its assets.

Alex and Ani had a short stint in Australia, having launched in December 2015 under the Karin Adcock-owned House of Brands (HOB). The brand quickly gained a solid distribution base of around 120 stockists.

"The company is currently saddled with $US127.4 million in debt obligations, as well as $29.1 million in unsecured trade debts... Almost all of its major unsecured creditors are shopping centre owners"

Twelve months later, in November 2016, Alex and Ani opened its first ‘concept’ store in Australia at the Westfield Fountain Gate shopping centre in Melbourne. Plans for a further nine stores were announced; however, by October 2017, HOB declared that Australian distribution would cease.

Adcock told Jeweller at the time: “We have been in negotiations with Alex and Ani US on creating a viable future for Alex and Ani in Australia and New Zealand; however, we have not been able to reach an agreement that would secure a sustainable role for House of Brands as distributor of the brand locally.”

In an email sent to Australian and New Zealand stockists, Adcock advised that the brand would be serviced by HOB until 15 January 2018.

Financial difficulties

In August 2019 Alex and Ani became embroiled in a legal stoush with Bank of America, claiming the lender misclassified a payment in order to push the company to default on a $US170 million loan.

According to a complaint filed in a New York court on 25 July 2019, Bank of America granted the company the loan in 2016 to enable the purchase of a production facility. The bank then claimed the company defaulted on the loan in December 2018, however representatives for Alex and Ani said the company was not warned and that the decision had been made on a technicality.

Jeweller reported at the time, “Alex and Ani’s cash flow has been severely disrupted; it has lost access to its credit line and has close to $US16 million ($AU23 million) in outstanding payments on its books. It was also unable to purchase seasonal inventory, which, it has alleged, lead to a steep decline in sales.”

Forbes estimated that the company’s sales had fallen by $US50 million to $US500 million ($AU738 million) in 2018 and would total $US420 million ($AU619 million) in 2019.

In September 2019 a new debt structure was finalised with its syndicate of lenders, led by Bank of America.

The restructuring called for founder and CEO Carolyn Rafaelian to step down from the management of the company and for her investment vehicle, the Alex and Ani Pledge Co., to divest its controlling interest.

The company's majority stakeholder, London-based investment firm Lion Capital, then installed Bob Trabucco, the former chief financial officer of Signet Jewelers, as the new CEO. Trabucco was also formerly Alex and Ani’s chief restructuring officer.

Bankruptcy implications

The Chapter 11 filing means Alex and Ani has entered into a restructuring agreement with debt and equity holders as it works to reorganise and boost its online and wholesale businesses.

According to court documents, Alex and Ani now has about 524 staff (part-time and full-time) and operates 74 stores in the US, Canada, and Puerto Rico. About one-third of its stores are still closed due to the COVID-19 pandemic.

Its wholesale business has reduced from 59 per cent of revenue to only 19 per cent. Its website is now its biggest traffic driver, accounting for 45 per cent of revenue.

Alex and Ani’s bankruptcy filing listed assets and liabilities of $US100 million to $US500 million each; Trabucco said the company is currently saddled with $US127.4 million in debt obligations, as well as $29.1 million in unsecured trade debts.

Almost all of its major unsecured creditors are shopping centre owners such as US-based Simon Property Group and Brookfield Property Partners, which are among the largest unsecured creditors with each owed more than $3 million in rent payments.

Chapter 11 bankruptcy in the US is roughly equivalent to voluntary administration in Australia, and gives a company relief from its obligations so it can continue to operate while it restructures.

The retailer expects “little to no disruption” in operations as a result of the bankruptcy filing.

Alex and Ani’s demise has been closely watched by the international jewellery industry given that it once had 1,000 employees and operated more than 100 stores.

It is estimated that it once produced around 10 million bracelets annually, eventually earning the company a valuation of more than $US1 billion, with Forbes bestowing the title of "the bangle billionaire" upon founder Rafaelian.

Rafaelian – the daughter of Ralph Rafaelian, founder of jewellery manufacturer Cinerama Jewelry – was also featured on the cover of Forbes' 'Richest Self-Made Women' issue; however, she has since lost control of her company and Forbes subsequently downgraded her fortune by $US900 million, to roughly $US100 million.

 

More reading:
Alex and Ani fights legal battle
Alex and Ani, House of Brands part ways
Alex and Ani hosts Aussie store launch party
Alex and Ani to open 9 stores before Christmas
 











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