Jun 25, 2023
American shoemaker Rockport Group filed for Chapter 11 bankruptcy protection in a Delaware court, the group's second bankruptcy filing after May 2018.
Private equity firm Charlesbank is poised to take over ownership. Previously, the industry had rumored that the American brand management group Authentic Brands Group (hereinafter referred to as "ABG") had the intention to take over.
Court documents show that while Rockport has operating income of more than $203 million in 2022, "its liquidity is insufficient to meet further economic challenges." Currently, Rockport claims its liabilities and assets are between $50 million and $100 million, and says it owes nearly $47 million to its top five creditors. The company also reported that about $61 million of its nearly $100 million in financing debt is due this August.
Earlier in May, Rockport had notified state officials that the group could close its Massachusetts headquarters by July. The move could cost about 150 jobs, according to The Boston Globe.
Currently, Rockport operates globally, with 30 distribution partners in more than 60 countries, more than 1,100 points of sale, products are produced by manufacturers in China, India, Bangladesh, Vietnam and Brazil, and the 2022 brand The total production of shoes exceeds 4.8 million pairs. Rockport said it will continue to operate during the Chapter 11 lawsuit.
Management said it had filed motions to "review and restructure" its business and better position the brand for future growth opportunities. Chief executive Gregg Ribatt has resigned and will remain on hand to assist with an orderly transition, while Joseph Marchese has been appointed head of restructuring.
Joseph Marchese stated, "It is appropriate to apply immediately for Chapter 11, giving the company the opportunity to assess the situation and develop processes to maximize the recovery of value for all parties involved. Rockport has a valuable asset that can be effectively managed through an organized joint process. I want to assure all employees, customers, creditors, contracting parties, investors and other stakeholders that we will do this with diligence, accuracy and transparency."
With more than 50 years of history, Rockport was founded in Massachusetts in 1971 by father and son Saul and Bruce Katz. Saul Katz was president of Hubbard Shoe Co., a New Hampshire-based shoe company that went out of business in the late 1960s. Known for its sneakers, Rockport was the first company to bring rubber-soled shoes to market in an era when other shoemakers were still focusing on leather-soled shoes. Additionally, Rockport sells footwear such as sneakers, boat shoes, and sandals.
In 1986, the Katz family sold Rockport to Reebok, an American sporting goods company, for $118 million. Rockport has been part of the Reebok portfolio for over 30 years. Due to the wrong market management route, Reebok's performance continued to decline. In 2006, it was wholly acquired by the German sports giant adidas (Adidas) and became an independent subsidiary. It was later sold by Adidas for 2.1 billion euros in August 2021.
As early as 2015, Rockport had been sold by Reebok to a joint venture between Berkshire Hathaway and New Balance. Then, in 2017, the joint venture transferred its interest in Rockport to the secured lender.
After its initial bankruptcy sale in 2018, Rockport has restructured to expand its leisure offering in an attempt to appeal to younger customers and simplify its business model. The restructuring work also includes closing all of the brand's retail stores in the United States, shifting to a more e-commerce-based retail model, and being committed to creating e-commerce wholesale channels. The first bankruptcy case was closed in 2020.
Still, Rockport's business is struggling with high administrative costs and weakening market demand for its core products due to the COVID-19 pandemic. Subsequently, the company reported that its operating income had fallen from $275 million in 2019 to $162 million in 2020.
About a year ago, Rockport's financial situation reached a critical point. Last spring, the company expected sales to increase after the resumption of work and significantly increased inventory purchases in the autumn and winter seasons.
However, Joseph Marchese, chief restructuring officer at Rockport's parent company, CB Marathon Midco, said in court filings, "Unfortunately, this sales increase never materialized. Instead, in response to inflationary pressures and weak economic conditions, wholesale customers and distributors canceled Or slashed orders, resulting in Rockport holding large excess inventory. Combined with supply chain challenges and rising interest rates, it is increasingly difficult for debtors to repay their financing obligations and pay trade payables in a sustainable manner."
Due to poor financial conditions, Rockport defaulted on part of the loan, and even though it later signed a moratorium agreement for the loan, it failed to deliver on the agreed time. Until May, Rockport signed a non-binding letter of intent to sell certain assets, and the company and its counterparties were still negotiating an asset purchase agreement.