India's largest exporter of leather and shoes Tata International is in the process of withdrawing its objection to the restructuring plan of US-based Aerogroup International Inc, famous for its Aerosoles brand of women's footwear. This was after the companies settled a licensing pact issue related to Aerosoles.
Aerosoles was launched in India by Tata International in November 2014, about two years after Aerogroup International and Tata International announced a strategic alliance to produce and market the Aerosoles brand in Europe and India. However, problems at Aerosoles' owner Aerogroup International put a spanner in the works.
On September 15, 2017, Aerogroup International Inc and five affiliated debtors each filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. They wanted to close most of the stores and focus on wholesale, e-commerce and international businesses.
As the bankruptcy matter progressed, the US-based shoe retailer and its debtors as part of the reorganisation sought to shorten the existing 30-year licensing deal with Tata International signed in 2012. Consequently, earlier this month Tata International Ltd objected to the confirmation of the plan, a US court document shows.
After some rounds of discussion, Tata International and Aerogroup are apparently now on the same page.
"Tata International had originally filed an objection to the restructuring plan, which it is currently in the process of withdrawing, after reaching an agreement with the principals," a company spokesperson told DNA Money.
As per the revised agreement, the contract between Tata International and Aerogroup will continue to remain in effect till March 2019. Financial terms of the pact, including any possible compensation for Tatas, have not been disclosed.
It is understood that Aerogroup had plans to restructure over $70 million in debt and get a buyer/investor for the business and exit the women's shoe retailing business that involved selling its Aerosoles intellectual property and other assets to another company.
Though Tata International does third-party contract shoe manufacturing for renowned players like Marks & Spencer, the strategic association with Aerosoles was going to give them time to build the brand in India.
The Tata Group company in 2014 had said it invested $1.5 million as an initial investment into the Aerosoles brand and was expecting to make a total investment of $3-4 million in the ensuing 3-4 years as Aerosoles set out a plan to rack up sales of Rs 200 crore from India.
AMICABLE SOLUTION
- Tata International, Aerogroup are now on the same page
- The new contract will remain in effect till March 2019
- Financial terms of the pact have not been disclosed
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