GBG USA bankruptcy stokes tension among Bangladeshi RMG manufacturers

The bankruptcy of Global Brands Group (GBG) Holding Limited’s American subsidiary has stoked tension among Bangladeshi ready-made garment (RMG) manufacturers who are owed money by the apparel and footwear wholesaler.

GBG USA sourced apparels from at least 10 Bangladeshi factories, according to manufacturers, and payments to several of these factories are pending. 

According to the company’s websites, GBG USA is an associated organization of Hong Kong-based Fung Group.  

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They supply footwear and apparel wholesale to Macy’s Inc, Nordstrom Inc, and other US department stores as well as warehouses, off-price retailers, and Amazon.com Inc.

Recently, the North American division of GBG Holding filed for chapter 11 protection in the US Bankruptcy Court of New York, putting its apparel and footwear brands up for sale with help from a $16 million bankruptcy loan, reports the Wall Street Journal.

The retail landscape has been greatly impacted by Covid-19, creating hardships for them to survive, moreover, structural shifts in the retail industry, disruptions of supply chain became detrimental for GBG USA, the company said.

Shahidullah Azim, vice-president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said: “This buyer used to source apparels from 10 to 12 apparel factories of our country. We are keeping an eye on the whole matter. We will take necessary steps so that our entrepreneurs do not face any financial losses due to the bankruptcy of GBG.”

Li and Fung, another subsidiary of Fung Group, also sourced apparel items for GBG USA from Bangladesh. 

Rising Group, a Mirpur-based BGMEA-listed apparel factory, has shipped apparel items to GBG USA through Li and Fung for seven years. 

It shipped garments worth $160,000 to GBG last year at a discounted price amid the outbreak of the pandemic, said Mahmud Hasan Khan, managing director of Rising Group. 

“Clothes worth $293,000 manufactured against the company's order have been lying in the warehouse for a long time, resulting in losses worth Tk2.5 crore for Rising Group,” Khan added.

GBG told them to wait, so for a long time, the products have been lying in the warehouse. 

“As they are now bankrupt, we have to send the designs to other buyers and try to sell it to them,” he further said.

Regarding pending payments, he said that they have contacted the Singapore-based representatives of the company. 

Usually, employees and warehouse owners of the bankrupted company receive arrears after the sale of the property. Then if there is anything else left, the sourcing company might get it, though the sum is usually very little.

GBG USA had also ordered products worth $2.4 million in late 2019 from Denim Expert Limited, a Chittagong-based apparel factory. 

The company had managed to ship the products before the outbreak of Covid-19. 

But GBG USA delayed taking the products when the pandemic hit the US. 

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Denim Expert then put pressure on GBG USA by helping to publish reports in both local and foreign media outlets on the issue, after which the American company started taking the products. 

The factory finally received payments 1.5 years after the purchase order was first made.

Mostafiz Uddin, managing director of Denim Expert Limited, said that bankruptcy of the buyers is nothing new but it negatively impacts supplier factories. 

“In this case, when business organizations and the government come forward, it is easier to collect the due payment. My company has been blacklisted by several buyers’ organizations as I raised my voice against the injustices of GBG USA,” he added.