Los Angeles-based BH Cosmetics, majority-owned by MidOcean Partners, has filed for bankruptcy after betting on celebrity collaborations with Doja Cat and Iggy Azalea to propel sales.

WHO: LA-based BH Cosmetics launched in 2009, and is a leading direct-to-consumer color cosmetics brand focused on the Millennial / Generation Z consumer. BH offers a full range of color cosmetics, brushes, and accessories at value pricing. The company had a worldwide social media following across multiple platforms and utilizes a deep influencer network to drive brand awareness and customer acquisition. Given the company's heritage as a digitally native e-commerce color cosmetics brand, BH developed an advanced e-commerce platform with proven capabilities in customer acquisition, consumer engagement, and customer loyalty. BH Cosmetics recently created makeup lines with Doja Cat and Iggy Azalea. BH sold its products online, as well as through Ulta Beauty and other retailers.

WHY: "The debtors' declining revenues are insufficient to support continued operations," BH wrote in court documents. BH said it faced "increased competition" in the beauty category, and that attempts to maintain market share eroded profitability. "The debtors have also struggled to obtain profitability after pursuing an ultimately unsuccessful launch of various product lines," BH's chief restructuring officer, Spencer Ware from Riveron Management, wrote in a declaration.

DETAILS:

• BH Cosmetics filed for Chapter 11 bankruptcy protection in Wilmington, Delaware, on January 14, with plans to sell its intellectual property for $4.3 million.
• BH owes $9.6 million on a term loan, and $13.9 million on a revolving loan, the company said in court papers. The company also has large creditors based in China, including Dongguan Fay Cosmetic Brushes Co., Beauty Beyond Industry Ltd. and Shenzhen Colorl Cosmetic Products Co. that are each owed more than $1 million.
• Rapper Doja Cat is owed $200,000 by the company via an LLC in her name.
• BH hired Hilco Streambank and has signed a purchase agreement with RBI Acquisition Holdings LLC as the stalking-horse bidder for the assets. The company hired a banker in a pre-petition sale attempt in September, which did not work out.
• The company brought in a new management team in 2019, but the pandemic had a crushing effect on the BH business, as sales dropped from $55.8 million in 2019 to $33.6 million in 2020.
• The Doja Cat and Iggy Azalea launches "fell below expectations."
• Mid-Ocean Partners made a majority investment in February of 2018. According to WWD, industry sources indicated the brand had between $50 million and $60 million in net sales and was very profitable at the time.