We know that home shopping fans don’s want to believe it, and neither do we, but makeup-artist-to-the-stars Mally Roncal’s namesake cosmetics company is in trouble. It has filed for involuntary bankruptcy.
We swear by Roncal’s mascara, which is a staple on QVC, so we’re a little shaken. And we love her bubbly personality. Yet we learned about her woes Sunday after a smart cookie posted the news on QVC Addicts on Facebook.
Then we looked up the court papers in Maryland’s bankruptcy court, and there are reams of them online. It would take forever to read through all of them, but here is what we gleaned from the docket as best we can explain it.
Mallygirl LLC, which is based Towson, Md., was forced to file for Chapter 7 by its creditors, which include Brownie Mae Co. of Newark, on April 20.
In the filings, the creditors claim that the cosmetics company was set to sell all its assets for $7 million to Beauty Visions LLC, whose business address is Loeb & Loeb in Manhattan. The creditors allege that the proposed price is well below the value of those assets, which it puts at $18 million.
Those assets include merchandise consigned to QVC and held at its warehouses across the nation.
Most of the $7 million was slated to be paid to Mally’s secured lender Essex Bank, with no funds left to pay any of the company’s other creditors, which obviously didn’t sit well with those creditors. That’s why they went to court. Mallygirl had defaulted on a loan to the bank.
To stop the proposed sale and get an assessment of what was fair to creditors, they requested that a Chapter 7 trustee be appointed.
According to court papers, Mallygirl started looking for a buyer back in August 2014 when its business went sour.
“Mallygirl’s sales have weakened in recent years,” a court filing by the company’s creditors says.
“These shortfalls left Mallygirl both unable to make timely debt-service payments to Essex Bank and to meet obligations of its unsecured suppliers. Prior to the petition date, Mallygirl was subject to formal and informal forbearance agreements with a number of its suppliers. Prior to the petition date, the debtor considered various options in addressing its weakening financial performance, including efforts to obtain additional equity infusions.”
Roncal is mentioned in court documents.
“The value of the debtor (Mallygirl) and is assets is to a great degree based on the talents and services of Ms. Roncal,” papers said. “Ms. Roncal is both the face of the company and the brand, but is also the company’s chief sales’ person through her regular appearances on QVC.”
The pending sale was contingent on Roncal signing an employment agreement “to continue her
role as the face of the brand.”
Delaying a sale will decrease the value of Mallygirl’s assets, creditors claim, and they want bidding on the company.
“The urgent need to expedite the sale process cannot be understated,” they said in court papers. “The debtor’s cash will be depleted to almost zero in about five weeks, because QVC, a major
client of the debtor, has ceased paying the debtor on its accounts receivable.”
“Moreover, the inventory has a limited shelf life and is diminishing in value daily, and would be nearly worthless if operations cannot be funded or the sale does not close.”
Mallygirl has sought to have the case converted to a Chapter 11 bankruptcy proceeding.
The list of 20 largest unsecured creditors includes QVC Royalty of Wayne, Penn., which is owed $118,000 and Topline Products Co., of Wayne, N.J., which is seeking $2.74 million.