Struggling apparel designer Mossimo Inc. has lined up a $4.5-million loan that will allow it to stay alive until a critical licensing deal with Target Stores takes effect next year, a company attorney said Monday.
Mossimo, which was on the verge of running out of money, will use part of the proceeds to pay a trio of Los Angeles-area creditors that had sought to force the Irvine company into bankruptcy liquidation, attorney Peter Gilhuly said.
To secure the financing, founder Mossimo Giannulli personally guaranteed half the loan from CIT Inc., Gilhuly said. The company's inventory and accounts receivable--money that customers owe Mossimo--are also being used as collateral.
The additional financing "allows the company to focus on its operations instead of on the bankruptcy process or on raising money," he said.
Mossimo agreed to pay a total of $336,000 to three companies that had filed the involuntary bankruptcy petition--Pacific Apparel Resources Inc., Caeco Enterprises Inc. and Wilmar Concepts. The total includes payments of $58,000 to Pacific for fabric and $125,000 to Caeco for finished goods that were ordered but had not been received by Mossimo, Gilhuly said.
When the firms filed the bankruptcy petition in May, attorneys said Mossimo owed about $650,000.
As a result of the pending agreement, Mossimo last week filed a petition in federal Bankruptcy Court in Santa Ana seeking to dismiss the involuntary bankruptcy. A hearing is scheduled for July 25.
An attorney representing the suppliers could not be reached for comment.
Mossimo, which had once harbored dreams of being the next Ralph Lauren, signed a licensing pact in March with Target Stores. The deal guarantees Mossimo royalties of about $27.8 million in the first three years.
The company announced it would lay off about 90% of its workers and close its South Coast Plaza boutique and its outlet store in Ontario in a major restructuring linked to the Target deal.
Target welcomed news of the financing arrangement. "We're totally excited about our partnership with Mossimo and glad that this will help them out," spokeswoman Carolyn Brookter said
Mossimo's stock closed Monday at 76 cents, down 2 cents a share, in over-the-counter trading. The company's shares, delisted in May from the New York Stock Exchange, have lost more than 90% of their value since the beginning of the year.