In recent news, luxury fashion retailer Farfetch has made a surprising announcement regarding the sale of its business and assets. Through a pre-pack administration process, the company has sold all of its business and assets as of January 30, 2024. The sale was facilitated by Coupang Inc., a prominent internet company, through its entity named Surpique.
Initially, Farfetch had agreed to an exclusivity period until April 30, 2024, during which it would explore other potential buyers for its business. However, with this new deal in place, that option is no longer on the table. The sale was the result of a marketing process carried out by JP Morgan on behalf of Farfetch, but unfortunately, no competing offers were received.
In a statement released by Farfetch, they made it clear that they do not anticipate investors or note holders to recover any of their outstanding investments. In fact, the company expects to be liquidated. This statement has not been received well by a group of institutional investors holding over 50% of Farfetch's convertible notes.
This investment group is determined to fight back. They see the exclusion of a consensual outcome as detrimental to the interests of investors, shareholders, and employees. They have expressed their intent to explore all possible litigation steps to address their concerns.
The group accuses Farfetch of rushing through the sale process after declaring the company in default and demanding immediate repayment of the notes' value. However, the exact amount they seek to recover has not been disclosed. Furthermore, they dispute Farfetch's claim that the company and its assets were adequately marketed, stating that the speed of the sale process and loan terms hindered proper marketing and failed to maximize asset value.
Interestingly, before this sale, the investment group mentioned that there were at least three credible partners interested in acquiring parts or all of Farfetch's business. One potential partner is tech-investor Carmen Busquets, who has reportedly been seeking funds to 'rescue' Farfetch.
Adding another layer to the situation, Farfetch possesses assets that could be spun off to fulfill its obligations to note holders. These assets include the Browns luxury boutique, Stadium Goods, the New Guards Group with the Off White brand, and a new Reebok license agreement. Additionally, the company holds $200 million in Neiman Marcus Group stock.
To prepare for their response, the investment group has enlisted the help of Ducera Partners as financial advisors and Pallas Partners as legal counsel. Pallas Partners has experience representing note holders in high-profile cases, like the litigation against Credit Suisse involving Proindicus Mozambique. They are currently involved in representing an ad hoc group of Bombardier note holders in a lawsuit.
Fiona Huntriss, a partner at Pallas Partners, expressed her clients' concern over the distress sale and the potential harm to employees and investors. She raised questions about the reasons behind this sale, whether the business was marketed to other parties, and the value-destructive nature of the proposed sale to Coupang. As of now, there has been no response from either Farfetch or Coupang regarding these concerns.
This is a rapidly developing story, and we will keep you updated as more information becomes available. In the meantime, you can read our previous reports on the investment group's position and the Farfetch-Coupang acquisition. Stay tuned for further updates.
