So much for R/M. Can you say DD?
VIRGINIA BEACH
Headgear Inc., a Virginia Beach apparel distributor that attracted attention with its youth-oriented shirts, jackets and jeans, has filed for bankruptcy court protection from creditors.
The company, known for its Blac Label brand, already had become embroiled in litigation with a joint-venture partner and a supplier of imported apparel.
In a Chapter 11 filing with the U.S. Bankruptcy Court in Norfolk, Headgear listed liabilities of $14.6 million, including $3.8 million of secured debt owed to RBC Centura Bank. Headgear said its assets totaled $12.8 million, including inventory valued at $2.76 million.
The company filed for bankruptcy protection on Jan. 12 and provided the breakdown of its assets and liabilities on Feb. 4.
Headgear also reported that its sales in 2010 fell more than 25 percent to $26.4 million from $35.6 million a year earlier. In 2008, its sales totaled $46.2 million, according to the schedule of assets and liabilities.
Jeffrey S. Watson, the company's CEO and founder, could not be reached for comment. Phone calls to Headgear's bankruptcy lawyer were not returned.
Chapter 11 of the bankruptcy code enables a company to continue doing business while it attempts to restructure its debts under court supervision. In a filing for court permission to use some of its cash to pay employees, Headgear said last month it sought protection from creditors so it could negotiate with potential investors and purchasers.
The bankruptcy filing brought a temporary halt to some of the litigation involving Headgear. One of its suppliers, Newtown Inc., filed a complaint against Headgear and its Blue Holdings Head Gear JV joint venture in October, contending that Headgear failed to pay $2.6 million that it owed the Seattle-based importer. Headgear ordered and agreed to pay for $6.4 million of goods but paid only part of that amount, Newtown said in a suit in U.S. District Court in Norfolk.
Because of the bankruptcy, that part of the Newtown suit involving Headgear will be stayed, pending the resolution of its bankruptcy case, U.S. District Judge Jerome B. Friedman ruled Friday.
Last year, Headgear, its president and the Blue Holdings Headgear joint venture filed suit against a partner in the joint venture, contending that he defamed their reputations. Because of alleged defamations by partner Paul Guez of New York City, Headgear, Watson and the joint venture lost business opportunities, the plaintiffs argued. Their suit, originally filed in Virginia Beach Circuit Court, was moved to federal court in Norfolk in January.
In response to the complaint, Guez said the terms of the joint-venture agreement required its partners to arbitrate any disputes and prohibited any claims for lost profits or lost business opportunities. According to the partners' 2008 agreement, his apparel manufacturing company Blue Holdings provided denim products to the joint venture and Headgear handled marketing and sales, Guez said in a court filing.
Tom Shean, (757) 446-2379, tom.shean@pilotonline.com
