Global Feet on Last Legs
Global Brands Marketing, Inc. (GBMI), which abruptly terminated its remaining 70 employees in early November, appears to be dead and without any hope of revival. All that remains is for a few global corporations to squabble over the carcass of the Santa Barbara-based footwear giant. On December 3, for example, the Italian apparel firm Diesel went toe-to-toe with Greystone Business Credit II (GBC) in a U.S. District Court in Manhattan over the fate of about $16 million in shoes designed and marketed by GBMI that are now sitting-and growing less fashionable by the day-in a Southern California warehouse.
Greystone is a New York private investment group, the arm of which involved in this litigation serves distressed or overextended firms “that cannot arrange conventional financing,” according to its Web site. It does so “by concentrating on assets rather than the borrower’s financial statements.” The details of Greystone’s arrangement with GBMI are hard to come by. GBMI has not declared bankruptcy, which would make its assets a matter of public record. The company’s founder and CEO, Sudeepto “Killick” Datta, did not return calls, and is avoiding even his closest former business associates, according to those who have tried to reach him.
However, Greystone’s asset-based loans range from a minimum of $500,000 up to $10 million, with the ability to syndicate even larger loans. It would appear that when Greystone’s loans failed to pull GBMI out of a fatal tailspin, the lender of last resort assumed possession of GBMI’s assets, and perhaps a controlling interest in the private company that allowed it to make the business decisions.
Diesel is one of just six shoe brands that were being designed, manufactured, and marketed by Global Brands in 2005, when the company totted up $250 million in sales. At that time, GBMI also employed about 250 white-collar workers at its headquarters on Hollister Avenue in Goleta-plus an untold number of factory workers in China, India, and Italy. Datta, its founder, was a prodigy from Mumbai, India, who earned an MBA from Oxford University while still in his teens and by his mid twenties was in charge of global distribution for Nike Corporation. As a previous Independent article on GBMI stated, Datta started GBMI in 1996 “with just one designer and a handful of salespeople.” Diesel, which at the time had no shoe line to speak of, was his first client, with exclusive international licenses for the XOXO, Nautica, 7 for All Mankind, and Mecca brands soon following. GBMI then launched several of its own footwear brands as well.
Datta’s empire began to shrink in 2006, when consumers failed to buy into GBMI’s ambitious and costly attempt to revive the shoe brand Pony; GMBI laid off about a third of its local workforce and moved to smaller quarters in Carpinteria. Another blow came when a new automated warehouse system failed to mesh with GBMI’s software, crippling GBMI’s distribution system for months. A judge then put a legal lock on the inventory in response to lawsuits by creditors, including Diesel, which reportedly is claiming millions in damages due to late royalty payments. On November 2, Datta signed a letter saying that all employees were being terminated. At the same time, GBMI cancelled its group health insurance policy. Among those hit hardest by the layoff, according to a December 3 Pacific Coast Business Times article by Stephen Nellis, were employees with pre-existing conditions who cannot find new coverage they could afford.
At least one bankruptcy lawyer said that the scenario unfolding at this point is most likely a liquidation, an attempt by Greystone to collect GBMI assets before the unsecured creditors-including employees with unrepaid expenses-get a shot at them. Another option is for those creditors to organize in order to file an involuntary bankruptcy for GBMI. Greystone could itself file for bankruptcy and reorganization for GBMI after getting its own money back, according to experts, but the more likely scenario is that it will just let the company dissolve.
