The fall of Brooks Brothers wouldn’t be complete without a drawn-out denouement of ignominy. And so the $27 billion Del Vecchio family is being sued by a former Hong Kong investor (suggesting perhaps globalism just isn’t good for American companies).
The billionaire Italian family that until recently owned Brooks Brothers has been accused in a lawsuit of driving the iconic apparel retailer into bankruptcy instead of selling it, to avoid paying millions of dollars to an investor.
In a complaint on Monday, Hong Kong clothing maker Tal Apparel said Claudio Del Vecchio and his son Matteo pressured it to invest $100 million in Brooks Brothers in 2016, and promised it would be “made whole” if they later sold the retailer for less than $652 million.
The complaint said the Del Vecchios lined up “several” bids for Brooks Brothers in 2019, before the COVID-19 pandemic, but did not pursue them because they would owe Tal money, and even asked if Tal would take a “haircut” on any payment.
Instead, the family put Brooks Brothers into Chapter 11 last July, making Tal’s original investment “nearly worthless,” according to the complaint in Manhattan federal court.
The defendants include the Del Vecchios and Delfin SARL, a holding company for family investments including eye wear giant EssilorLuxottica and Mediobanca. Claudio Del Vecchio bought Brooks Brothers in 2001.
A person close to the Del Vecchios said: “The allegations in the complaint are false and we expect the court will dismiss the case.” Delfin, which owns a small Brooks Brothers stake, declined to comment.
Tal is seeking $100 million of damages, less sums received from Brooks Brothers’ bankruptcy estate.
The 70-year-old family-run firm said it makes one in six dress shirts sold in the United States, and Brooks Brothers had been its largest customer.
Forbes magazine said on Tuesday the Del Vecchio family is worth $27.9 billion.
Founded in 1818, Brooks Brothers is the oldest continually operating U.S. apparel brand, known for its suits, preppy clothing, and dressing 40 U.S. presidents including Abraham Lincoln, John F. Kennedy and Barack Obama.
A venture backed by licensing company Authentic Brands Group and mall owner Simon Property Group acquired Brooks Brothers in bankruptcy for $325 million.
The case is Castle Apparel Ltd et al v Del Vecchio et al, U.S. District Court, Southern District of New York, No. 21-04406.
“Your honor, this company only filed for bankruptcy in order to avoid paying its creditors and its investors, including my company, to whom it owes millions – it’s outrageous!”
“That’s correct, sir; you’ve summarized the state of affairs nicely. Case dismissed. Costs to be paid by the plaintiff.”
When I worked in finance, the guys that I worked for liked to go “bottom fishing,” or buying distressed companies cheaply, so I saw similar situations now and then. Based on the understanding that I picked up doing that sort of work, which is, I will admit is probably 20 years old, dealing with make-whole clauses in bankruptcy is fairly routine. You just need to see if some trigger event happened, and then see if the outcome is allowed by the relevant state law. I don’t see many disputed facts here, so I’d expect to see this resolved fairly quickly as a matter of law. Maybe someone with more a current understanding of bankruptcy law would able to make a more informed comment.
Let’s not forget that the Del Vecchios almost destroyed Brooks Brothers and that 100 Million USD is a drop in the bucket for them (as Jack Ancker stated), hard as this may be for most of us wage slaves to comprehend.
Claude, the Luxotica Group, et al, should be forced to run gauntlets down Madison & through the remaining US trad communities, whilst wearing that non-iron, darted, & skinny crap they schlepped. Maybe we could arrange to have them beaten by the actual manufacturing workers who used to produce their shirts, suits, & ties in MA, NC, NJ, & NY.
I really thought I was moving forward but then I think about my shirts & Southwick….
“Your honor, this company only filed for bankruptcy in order to avoid paying its creditors and its investors, including my company, to whom it owes millions – it’s outrageous!”
“That’s correct, sir; you’ve summarized the state of affairs nicely. Case dismissed. Costs to be paid by the plaintiff.”
When I worked in finance, the guys that I worked for liked to go “bottom fishing,” or buying distressed companies cheaply, so I saw similar situations now and then. Based on the understanding that I picked up doing that sort of work, which is, I will admit is probably 20 years old, dealing with make-whole clauses in bankruptcy is fairly routine. You just need to see if some trigger event happened, and then see if the outcome is allowed by the relevant state law. I don’t see many disputed facts here, so I’d expect to see this resolved fairly quickly as a matter of law. Maybe someone with more a current understanding of bankruptcy law would able to make a more informed comment.
If they lose the case, paying out $100 million is peanuts for the Del Vecchios.
This is literally above my pay grade.
So Brooks was having cash flow issues in 2016 and put pressure on its largest vendor to invest.
Let’s not forget that the Del Vecchios almost destroyed Brooks Brothers and that 100 Million USD is a drop in the bucket for them (as Jack Ancker stated), hard as this may be for most of us wage slaves to comprehend.
Re “Al Diavolo!”
They did indeed allow Brooks Brothers to go to the Devil.
Claude, the Luxotica Group, et al, should be forced to run gauntlets down Madison & through the remaining US trad communities, whilst wearing that non-iron, darted, & skinny crap they schlepped. Maybe we could arrange to have them beaten by the actual manufacturing workers who used to produce their shirts, suits, & ties in MA, NC, NJ, & NY.
I really thought I was moving forward but then I think about my shirts & Southwick….