NEW YORK — G&G Retail Inc., which operates the G&G, Rave and Rave Girl chains, is under growing financial pressure.
Financial sources said late last week that a secondary lender — believed to be private equity firm Cerberus Capital Management — pulled the plug on financing the junior retailer.
CIT Group is the primary lender, and it is unclear if the company would provide new financing for G&G. Representatives at neither Cerberus nor CIT could be reached for comment.
Ray Brown, senior vice president for human resources, said, “Holiday sales were disappointing. There is concern among our lending partners. We are in negotiations with our lenders.”
Brown added that once negotiations with lenders are successfully completed, he expects that suppliers will resume shipping merchandise to the stores. Brown declined comment on a timetable for when negotiations with lenders might be completed.
Financial and market sources said G&G put a moratorium on paying its bills in mid-December and hasn’t paid any vendors since then. A few factors stopped checking the company just before Christmas. Many vendors have since stopped shipping goods to the firm. G&G has about 590 stores.
G&G was part of the Petrie Retail Stores group. Petrie filed for Chapter 11 bankruptcy court protection in 1995. The nameplates under the G&G operation are the sole survivors of the Petrie era. Sister nameplates under the Petrie umbrella such as Petrie, Winkelman’s, Stuarts, Marianne and Jean Nicole are now part of the retail graveyard.
G&G Shops, as it was known back then, was sold during the bankruptcy in August 1998 to Cos Cob, Conn., buyout firm Pegasus Partners, TGV Partners and G&G’s senior management, which included Jay Galin and his son Scott.
Another financial source said in the last year the company has undergone a series of management changes. Melanie Cox, whose past experience includes a stint at Wet Seal, joined G&G as chief executive officer in January 2005. Amanda Bockman joined in August 2005 as chief financial officer. Her past experience includes posts at J. Crew and Norton McNaughton.
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It was Cerberus, the New York private equity firm, that helped finance G&G in February 2004. G&G hasn’t made money since its purchase by Pegasus, financial sources said.
“They had a lot of debt to service early on, and the Pegasus acquisition was essentially an LBO [leveraged buyout] from the bankruptcy. This company has been losing money, and maybe there’s no longer any reason for it to exist,” said a Wall Street analyst.
G&G targets the older high school teen, while Rave targets the junior high school crowd. Rave Girl targets the tween audience.
Financial sources noted that one issue for the company is whether it is in too many malls, and possibly in the wrong A, B and C door mix. There are also some malls that have all three nameplates as tenants.