Pat McGrath to Cede Control of Pat McGrath Labs in Bankruptcy Restructuring

THE WHAT? Pat McGrath has agreed to relinquish majority control of Pat McGrath Labs as part of a restructuring deal designed to pull the cosmetics company out of bankruptcy.

THE DETAILS Under the agreement, investment firm GDA Luma Capital Management will receive a 65% common equity stake in the brand, along with new preferred equity in exchange for forgiving debt previously loaned to the business. The deal follows Pat McGrath Labs filing for bankruptcy protection earlier this year after allegedly defaulting on a bridge loan exceeding US$43 million.

GDA Luma has also provided a US$10 million Chapter 11 loan to support operations during the bankruptcy process and may provide up to US$20 million to help fund the company’s exit from bankruptcy. McGrath will remain involved as chief creative officer and retain a minority stake, while additional equity will be allocated through a management incentive plan.

THE WHY? The restructuring aims to recapitalize the business, resolve debt obligations and stabilize operations, allowing the brand to continue producing and distributing its cosmetics globally.

Source: Bloomberg