
Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comFirm Insights
Author: Joel R. Glucksman
Date: December 11, 2015

Partner
201-896-7095 jglucksman@sh-law.comKarmaloop Inc., the major web-based streetwear retailer headquartered in Boston, recently announced that it had received approval from the Bankruptcy Court to convert its Chapter 11 bankruptcy case to a Chapter 7 liquidation proceeding. According to a Law 360 report, the company will now face the liquidation of all its remaining assets, because it failed to develop an adequate restructuring plan to accommodate its staggering tax debt.
In bankruptcy filings, the company cited priority taxes and administrative claims, along with failed expansion plans and a general decline in the retail clothing sector, as the primary factors that drove Karmaloop into insolvency. As a result, the firm filed for Chapter 11 bankruptcy protection in March.
At that time, Karmaloop listed more than $90 million in debt obligations, with over $30 million owed to its senior secured lenders. Further, according to a Beta Boston report, the firm cited in its first day declaration that it owed approximately $25 million in junior secured debt and $40 million in unsecured debt, which includes more than $19 million in trade liabilities.
The company’s decision to file a motion to convert its Chapter 11 bankruptcy to a Chapter 7 liquidation came after it was not able to reach a sale agreement. According to a Boston Globe report, in 2014, famous music moguls Kanye West and Damon Dash were interested in submitting bids to acquire Karmaloop, but the negotiations fell through. In turn, Karmaloop decided to file for Chapter 11 bankruptcy protection because it no longer had the finances to continue operations.
Despite objections from the U.S. Trustee’s Office, the bankruptcy court had provided approval for an agreement between the company and its unsecured creditors that will expedite the company’s sale to its senior secured lenders. Law 360 reported that this agreement was reached by a committee of the company’s unsecured lenders and a group of senior secured lenders. As a result of the agreement, the bankruptcy court would have approved the liquidation sale of the company to a group of its senior secured lenders in May 2016 under the name ComCap Acquisition LLC.
As part of the initial sale agreement under its Chapter 11 filing, ComCap Acquisition LLC acted as the stalking horse bidder in the asset auction with a $30 million bid. This bid served as a portion of the $30 million owed in prepetition secured debt obligations with the company’s unsecured creditors. However, no other bids came forth, so the sale was canceled.
Part of the problem with the sale was that a majority of Karmaloop’s unsecured lenders objected to it. Their objection was based on the fact that the Chapter 11 reorganization plan would have shut out all creditors except for the senior secured lenders.
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Receiving a federal grand jury subpoena is not something most businesses or individuals anticipate. While it can be concerning, a federal grand jury subpoena does not necessarily mean that you are being accused of wrongdoing. It does, however, mean that a federal criminal investigation is underway and that federal prosecutors believe you may possess information […]
Author: George McGowan

Most New Jersey business owners purchase insurance policies, file them away, and assume they are protected if a claim arises. Without a regular insurance coverage review, many companies discover gaps only after a lawsuit, cyberattack, property loss, or other significant event occurs. An annual insurance coverage review can help businesses identify potential risks, ensure their […]
Author: George McGowan

Businesses and individuals often encounter situations where another party breaches a contract, fails to pay a debt, or continues harmful conduct. In many such disputes, a precisely drafted demand letter or cease-and-desist letter serves as a powerful legal tool. It can frequently resolve the dispute and avoid litigation. While demand or cease-and-desist letters can resolve […]
Author: George McGowan

Key provisions in your contracts, including those relating to indemnification, insurance, and defense, are essential to contract risk management. While sometimes considered “boilerplate,” these provisions play a pivotal role when determining which party is responsible for certain costs and liabilities. They must always be negotiated and drafted carefully. Indemnification Clauses Businesses should never overlook the […]
Author: George McGowan

Portability of estate and gift tax enables a surviving spouse to inherit any unused portion of their deceased spouse’s federal estate and gift tax exemption. So, if one spouse doesn’t utilize their full exemption, the surviving spouse can effectively double their exemption amount with regard to estate tax liability. For married couples, portability offers a […]
Author: Marc J. Comer

For many of us, pets are more than companions—they are members of the family. Yet they are often overlooked or inadequately provided for when it comes to estate planning. A pet trust offers a legally enforceable way to ensure that your animal continues to receive proper care if you become incapacitated or pass away. As […]
Author: Marc J. Comer
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!