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Dive Brief:
Makeup brand Pat McGrath Cosmetics — commonly known as Pat McGrath Labs — has agreed to receive about $30 million in new financing from its lender GDA PMG Funding, according a Tuesday press release.
The deal includes $10 million in new debtor-in-possession financing and a commitment of at least $20 million in “post-emergence working capital,” per the release. Brand founder and makeup artist Patricia McGrath will transition from CEO to chief creative officer.
GDA Luma will hold a controlling equity interest in the brand. A restructuring term sheet from the court proceedings shows GDA will form a holding company to own 100% of membership interests in the reorganized brand. McGrath will “remain a significant equity owner,” per the release, but those details and the employment agreement were not yet available in court documents.
Dive Insight:
Pat McGrath Labs and GDA have re-joined forces after some disagreement over alternative financing options.
“Pat McGrath Labs is a house built on audacious artistry, cultural relevance, and singular creative vision — one that has shaped the modern beauty conversation for over a decade,” Tuesday’s press release stated. “GDA Luma undertakes this investment with profound respect for that legacy, combined with the operational discipline and strategic perspective of an experienced global investor with a proven track record of repositioning iconic brands for enduring success.”
A full recapitalization of the brand is expected to be completed in the coming weeks, and Paladin Management Group has been retained to serve as the chief restructuring officer throughout the Chapter 11 bankruptcy process.
GDA and McGrath were at odds when the founder and CEO initially filed for bankruptcy in January.
McGrath at the time said her brand faced a disagreement about its outstanding debts to GDA, which ultimately led to GDA commencing a sale of the brand’s assets without the direct involvement of Patricia McGrath.
At the time of filing for bankruptcy to stop that sale, McGrath requested court approval of $1 million in DIP financing provided by herself. GDA had filed an objection to that proposal.
McGrath had “acted at the behest of my lenders” for several months and wanted to remain in the driver’s seat of the brand, she noted in her bankruptcy declaration.
Meanwhile, GDA, in its objection, described McGrath as a “reckless” steward of the cosmetics company’s assets, alleging she took out more high-interest loans instead of negotiating with GDA on recapitalization efforts over the past several months.