Rubie's Costume Co. seeks Chapter 11 bankruptcy protection
Citing ongoing industry shifts and COVID-19's impact on the lending market, Rubie's Costume Co. Inc. has sought Chapter 11 protection.
Rubie's and five affiliated companies on April 30 requested that the court consider their bankruptcy requests as one and allow the group time to pursue a replacement package for about $49 million in outstanding credit, according to court filings.
The business, with corporate headquarters in Westbury and sales headquarters in Melville, estimated it could secure a new credit arrangement within 90 to 120 days, but said it may pursue a sale if proposals did not emerge. Rubie's requested immediate access to $7.7 million in investment accounts, arguing the liquidity is needed to facilitate the restructuring and to function as it gears up for the lucrative Halloween season.
The court is slated to hold a telephone hearing on the matter Tuesday.
"Given the highly seasonal nature of our business, our manufacturing relationships in China, the chilling impact of the COVID-19 pandemic on the U.S. and the global economy and potential liquidity pressures, the board of directors determined that the Chapter 11 filings is our best path forward as we carry out our restructuring efforts," Rubie's president Marc Beige said in a statement included with a news release.
The company said through a spokeswoman it did not have time to discuss the case or how its operations have pivoted amid the pandemic. Rubie's noted in a news release that its makeup facilities are making hand sanitizer and its team is working on manufacturing face masks. Rubie’s employed 804 in February, but furloughed many due to COVID-19 and now has an active workforce of about 142.
Launched about 70 years ago, Rubie's secures licenses from companies like Disney and Marvel that allow it to make and sell costumes for popular movie and TV characters. Its affiliates also distribute souvenirs, novelty items and party goods. Rubie's bills itself as the largest costume designer, manufacturer and distributor, distributes and sells goods in 52 nations by working with brick-and-mortar stores and e-commerce retailers, according to court filings.
Rubie's has suffered because of a decline in customers, insolvency among some of its trading partners and competition with other manufacturers that have received nonexclusive rights to make costumes for popular characters, according to court filings.
In July 2016, Rubie's signed a three-year, $235 million credit agreement with HSBC, Bank of America, Wells Fargo, JPMorgan Chase, TD Bank and Citibank, with HSBC as the administrative agent, according to court filings.
In fiscal year 2018, the company made about $310 million in sales and $2 million in earnings before factoring in interest, taxes, depreciation and amortization, according to court filings.
By fiscal year 2019, sales fell to about $268 million, court filings show. Rubie's instituted a series of payroll and other expense reductions, which it noted in court papers saved about $4 million that year and is expected to cut costs by up to $5 million in fiscal year 2020.
The company made a series of forbearance agreements, which granted the bank group a security interest in and lien on some of their assets, and extended the status quo until May 4, according to court filings. Rubie's pledged $17.14 million in cash collateral, which is maintained in investment accounts.
Rubie's hired SSG Capital Advisors to help it find replacement financing and present a plan to the banks. Wells Fargo indicated it would spearhead a deal to provide an asset based loan, but pulled out on April 15, according to court filings.
"It advised the debtors that its decision was based on the conditions in the global lending market due to the COVID-19 crisis and internal restrictions on its current lending, and was not a reflection on the debtors’ creditworthiness," said a declaration from Beige.
With no agreement in place on April 29, Rubie's filed for bankruptcy, which Beige's declaration said would provide "the essential breathing space" needed to overcome a "short-term liquidity crisis."
Rubie's said in court filings it is optimistic about finding a new lender. The company is forecasting between $220 and $230 million in sales and $7 to $8 million in earnings, before factoring interest, taxes, depreciation and amortization, in fiscal year 2020, according to court filings. These figures include a roughly 18% decline in sales from the prior year and account for the estimated impact of COVID-19.
The company may consider a sale if proposals do not emerge, according to court filings.
More immediately, Rubie's argued in court papers that the banks are "significantly over-secured" and requested access to $7.7 million to pay employees and continue operations without interruption. The company said the value of collateral exceeds the amount owed and provides an equity cushion of more than 20%.
Rubie's, then and now
•The business started in 1951 as a candy and novelty shop in Queens.
•By the late 1970s, the company was manufacturing costumes.
•Rubie's has outfitted many an actor, including those portraying the Kool-Aid pitcher, fruit for Fruit of the Loom and chicken for Burger King.
•Rubie's made a $1,000, custom cowboy outfit for the son of the King of Morocco.
•The company completed a four-story, 124,000-square-foot corporate plaza in Melville in 2009, according to its website.