The baby care brand founded by celebrities Kristen Bell and Dax Shepard filed for Chapter 11 bankruptcy to facilitate being acquired by private equity firm Hildred Capital Management. 

WHO: Los Angeles-based Hello Bello baby care brand was founded in 2019 by actors Kristen Bell and Dax Shepard as a range of affordable and eco-friendly products ranging from diapers and wipes to sunscreen. The brand launched selling through its own direct-to-consumer channels and expanded to wholesale with retailers, including 4,700 Walmart locations, CVS, Kohl’s, and Albertsons.

WHY: Hello Bello has moved into bankruptcy as a result of supply chain issues like high shipping and production costs. The company decided to open its own manufacturing facility in Waco, Texas, but didn’t yield cost savings fast enough to turn the business around.The brand says it can create a 25% reduction in manufacturing costs at maximum capacity with total cash savings of up to $54 million.

IN THEIR OWN WORDS: “Given macroeconomic trends, including inflation and increased shipping costs, we believe that this course of action is the best path forward to ensure that Hello Bello continues to bring families the highest quality and most environmentally friendly products at affordable prices,” Hello Bellow CEO Erica Buxton said in a statement.

DETAILS: 

• Hello Bello filed for bankruptcy and agreed to a stalking horse bid from private equity firm Hildred Capital Management.
• Private equity firm VMG Partners invested in the brand in 2020. 
• Shepard and Bell are listed as holders of more than 12% of the company’s common equity.
• According to court documents, the stalking horse bid deal, valued at about $65 million, is expected to conclude within the next few months, and is subject to higher or better offers.
• The company expects to fund operations throughout the process via debtor-in-possession financing and listed assets and liabilities between $100 million to $500 million. 
• The brand’s largest creditor is a tissue products supplier that may be owed about $22 million, according to court papers.
• For the fiscal year ending Jan. 31, 2023, Hello Bello generated about $179 million in sales and had negative EBITDA of about $15 million. 
• The company carries approximately $65 million in debt, including $29 million from VMG.
• For the period ending Jan. 31, 2023, wholesale revenue comprised about 60% of Hello Bello’s total annual sales, while its e-commerce DTC business generated roughly 40% of sales.
• Diapers and training pants accounted for about 67% of the brand’s revenue in fiscal year 2022.
• The baby care company’s DIP financing is a revolving credit facility of about $47 million, which includes up to $12 million in new money commitments, with about $5.5 million of that available in the interim period.
• Willkie Farr & Gallagher LLP and Young Conaway Stargatt & Taylor LLP are serving as Hello Bello’s legal counsel. Jefferies LLC is serving as investment banker and Emerald Capital Advisors is serving as financial advisor.
• Lowenstein Sandler LLP and Alvarez & Marsal North America LLC are serving as legal counsel and financial advisor, respectively, to Hildred Capital Management.