Nasty Gal creditors demand say on Boohoo sale

Creditors of troubled US young fashion etailer Nasty Gal have demanded a say in the potential sale of its assets to the UK's Boohoo, which confirmed over Christmas that it was lodging a $20m bid for the company's intellectual property.

A committee of unsecured creditors of Nasty Gal, which is currently in Chapter 11 bankruptcy, has lodged a "limited objection" with a bankruptcy court to the potential sale, according to WWD.

While the limited objection does not amount the blocking of the deal what it means is the creditors will want a say in the sale negotiation to ensure that the value of Nasty Gal's assets are protected should a deal fall through.

At the moment the committee believes it has been placed in the position of mere observers to the sale process. "[...] while it appears that the committee will be allowed to witness the sale process and proceedings, unless the process is modified, the committee will be relegated to sitting in the bleachers with no binoculars," its objection states.

Boohoo confirmed on 28 December that it was planning to make a $20m bid for certain intellectual property assets from the LA-based business. The Manchester-based firm said it would seek US court approval on 5 January (tomorrow) for its subsidiary Boohoo F I Limited to be appointed as the "stalking horse" bidder for the Nasty Gal brand and customer databases.

The sale of the Nasty Gal assets will be governed by a court-approved bidding process that will last at least 30 days. Other bidders may enter the race, so it it is not a certainty Boohoo will win, but the stalking horse is generally considered to be favourite in such circumstances.

Nasty Gal, which was founded by the then 22-year-old Sophia Amoruso in 2006, entered Chapter 11 in November at which point Amoruso stepped down. It delivered net revenue of $77.1m in the year ended 1 February 2016 and made a net loss after tax and operating costs of $21m. Its revenue includes the sale of vintage clothing and third-party brands which would not form part of any sale to Boohoo.

Fast-growing Boohoo, which also operates in the trend-led fast-fashion space, was also founded in 2006. Should its deal with Nasty Gal go ahead, it would be its second acquisition in as many months. Earlier in December it announced it had acquired a 66% stake in young fashion etailer PrettyLittleThing for a cash consideration of £3.3m.