Liberated Brands was granted a dismissal of its Chapter 11 bankruptcy case after it was able to generate approximately $65 million from the sale of its assets, which does not cover the amount it owes to secured creditor JP Morgan.
Not only will JP Morgan not recover all of the money it is due, but unsecured creditors such as factories and service providers will not receive any payments.
“What that means, your Honor, is that based on the amount of value collected and the amount of value that we expect to be collected, there will not be enough proceeds, unfortunately, to pay the DIP (Debtor-in-Possession) claim in full or to pay the adequate protection claim for the ABL lenders in full,” said Matthew Fagen, the Kirkland & Ellis LLP restructuring partner representing Liberated at a Thursday hearing.
JP Morgan holds both of those claims, Fagen said.
According to Fagen, Liberated still needs to collect $27 million of the $65 million it has generated. It expects there to be a shortfall of $22.1 million in DIP claims and $5 million of ABL adequate protection claims.
Fagen said the company and its debtors examined the possibility of converting the Chapter 11 filing to a Chapter 7 filing but ruled it out because of the risk of increasing its expenses.
One creditor, payroll and staffing firm JobsRUs, objected to the dismissal and asked to be paid at least some portion of what it is owed, but were advised that there are no remaining funds to be allocated. According to court records, JobsRUs has provided warehouse services to Liberated since its bankruptcy filing which was critical for Liberated’s inventory liquidation efforts. The company says Liberated has more than $500,000 in outstanding invoices.
James Carr of Kelley Drye & Warren LLP, which represented the committee of unsecured creditors, attributed the lack of funds simply to more money going out than expected during the bankruptcy process, and less money coming in than expected.
For example, he called the sale of the international businesses “extremely disappointing.”
“Australia, New Zealand, got a price that was almost equal to the amount of the JP Morgan sub limit, which is somewhere, I believe, between $5 [million] and $8 million,” he said. In addition, Liberated’s litigation with Q4D, the new licensee for the Spyder brand, was more costly than anticipated, he said.
JP Morgan’s representative also supported the dismissal as the only viable option.
The judge presiding over the hearing granted the dismissal.
“I recognize this is not a preferred outcome, and I appreciate the economic hardship,” she said. “I do not take this decision lightly; however, the facts establish the dismissal is appropriate and meet the standards set forth in the code.”
Liberated Brands’ Descent into Bankruptcy
The former management team of Volcom founded Liberated Brands in 2019 after former Volcom owner Kering sold its intellectual property to Authentic Brands Group. Liberated became the operating partner for the Volcom in North America, Europe, Australia, and Japan.
In late 2023, Liberated acquired the retail assets of Quiksilver, Billabong, Roxy, RVCA, Honolua, and Boardriders in North America, in addition to the wholesale licenses for Billabong and RVCA.
Scaling the business so dramatically and so quickly led to many operational and financial challenges, however.
In the U.S., Liberated’s retail footprint went from 67 to 140 stores, and headcount swelled from 638 to 1,480.
Right at the time when Liberated significantly increased its operational and integration costs and overall complexity, the market changed.
A “lethal combination” of higher interest rates and inflation, brick-and-mortar retail challenges, and a slowdown in consumer demand strained Liberated’s finances and led to a cash crunch, Liberated CEO Todd Hymel said in bankruptcy court documents.
In December 2024, Authentic Brands Group terminated Liberated’s licenses for all the brands, including Volcom, and transferred them to new partners.
With little hope of continuing operations in North America, In January 2025 Liberated closed its corporate offices and laid off 350 corporate employees and 1,040 retail staff, according to court documents. It filed for bankruptcy in February 2025.
