Retailpocalypse Claims Popular Subscription Box Service Loot Crate
Over the past several years, the retail industry has watched as well-known members such as Sears, Mattress Firm, and Toys-R-Us have shuttered large numbers of stores or completely disappeared in what has come to be dubbed the “retailpocalypse.” Often, perhaps incorrectly, explained as the impact of growing on-line retail options upon traditional retailers, this downturn has previously appeared constrained to retailers with a significant brick-and-mortar footprint. The recent filing of on-line subscription box service, Loot Crate, Inc., may challenge such notions.
Los Angeles-based subscription box startup service Loot Crate, Inc. recently filed for Chapter 11 bankruptcy protection with plans to sell its business after reports that the company was facing severe liquidity and cash-flow problems emerged. Unlike most of the recent retail bankruptcies, Loot Crate’s demise is notable due to its exclusive on-line presence. Founded in 2012 by Chris Davis, Loot Crate is one of many subscription box services that gained popularity in recent years. The business ships curated fan boxes filled with products geared toward those with an interest in gaming and “geek products” on a monthly basis and has more than 250,000 recurring subscribers.
Despite this robust base, the company was unable to overcome recent financial stresses. As of the petition date, the company had failed to ship approximately $20 million in sales, owed more than $20 million in trade debt (including more than $5.87 million in outstanding sales taxes), and struggled to collect revenue because its credit card processor was withholding customer receipts. Loot Crate previously defaulted on a loan from Breakwater Management LP in 2017 but was able to successfully restructure out of court with a $21 million term loan from Atalaya Capital affiliate in August 2018. That term loan was recently purchased by Money Chest LLC who has also agreed to provide an additional $10 million in debtor-in-possession financing during the bankruptcy case.
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