Morphe and parent company file for Chapter 11 bankruptcy

Forma Brands LLC, the parent company of makeup retailer Morphe LLC, filed for bankruptcy in Delaware on Thursday with plans to be taken over by lenders including Jefferies Finance LLC and Cerberus Capital Management.

The company listed assets and liabilities of at least $500 million each in court papers. The Chapter 11 filing allows Forma to keep operating while it seeks court approval of a restructuring plan, though the company has already said it is closing all of Morphe’s US stores. 

The investor group slated to take ownership of Forma has agreed to provide $33 million of fresh financing in bankruptcy, according to a statement. The proposed acquisition — which includes Forma’s wholesale operations, online platforms and international Morphe retail stores — sets a floor for further offers and must be approved by a federal judge. 

The bankruptcy caps a tumultuous 2 1/2 years for the Pacoima, California-based company that failed to see revenues grow in spite of marketing deals with YouTubers and influencers. 

Morphe’s marketing strategy relied heavily on online personalities including James Charles, Jaclyn Hill and Jeffree Star — YouTube sensations who boast tens of millions of followers and whose collaborations with the brand regularly sold out. 

Influencers are now among the company’s largest unsecured creditors, with Hill and Star holding $2 million and $1.4 million in claims respectively, court papers show.

The main case is FB Debt Financing Guarantor LLC, 23-10025, US Bankruptcy Court for the District of Delaware. –BLOOMBERG