Frederick’s of Hollywood recently made a second trip to U.S. Bankruptcy Court after emerging from an initial Chapter 11 filing in July 2000. The following feature, the first of three parts, discusses the lingerie icon’s rich corporate history and initial Chapter 11 restructuring.
The Frederick’s of Hollywood empire dates all the way back to 1946, when Frederick Mellinger first started a mail order catalog service to sell lingerie. The following year, Mellinger opened his first “Frederick’s of Hollywood” retail store in Hollywood, CA. The brand quickly “gained enormous popularity,” expanding both its retail store presence and mail order catalog business. According to documents filed with the U.S. Bankruptcy Court, at one point, Frederick’s of Hollywood operated more than 200 retail store locations–in addition to its trademark mail catalog business and e-commerce Website.
True to its origin, today’s Frederick’s of Hollywood retails women’s apparel and related products with the following major merchandise categories: foundations (including various types of undergarments), lingerie (including daywear and sleepwear), ready-to-wear (dresses and sportswear) and accessories (including shoes, handbags, jewelry, personal care products and novelties). The Debtors’ target consumer base is women aged 18-45, and its principal offices remain on Sunset Boulevard in Los Angeles, CA.
In September 1997, Frederick’s of Hollywood sold its retail and direct businesses, pursuant to a highly-leveraged buyout (LBO), with approximately $70 million paid to former shareholders and professionals. Court documents explain that following this LBO, “[T]he Debtors suffered losses in profits and were unable to service their debt obligations.”
As a result of this “cash flow crisis,” Frederick’s of Hollywood and affiliated Debtors initiated their first Chapter 11 filing in July 2000 in the Central District of California. At that time, the Company explained that it had suffered in recent years from growing competition, especially Victoria’s Secret, a unit of Intimate Brands Inc.
The Court confirmed the Company’s Plan of Reorganization, which provided, among other things, the Debtors’ then-existing secured lenders with 80% of the reorganized company’s common stock, two tranches of new term loans and 70% of litigation proceeds, in December 2002. The Plan further granted holders of general unsecured claims 6% of the reorganized company’s common stock and 30% of the proceeds of certain litigation claims. Frederick’s of Hollywood emerged from its first bankruptcy in January 2003.
Check back next week for more information on the events that led to Frederick’s of Hollywood‘s second Chapter 11 filing.