Papaya Bankruptcy Protection Shocks Apparel Industry

Large Korean-run apparel business Papaya has shocked the jobber market after filing for Chapter 11 bankruptcy protection.

A large Korean-run women’s apparel business Papaya has filed for Chapter 11 bankruptcy protection, sending yet another warning to the rest of the downtown L.A.’s fashion district, known as the “jobber market.” As Papaya has been one of the biggest businesses in the district, the aftermath of its struggles is expected to affect many smaller brands.

Rumors about Papaya’s recent struggles have been circulating around the jobber market for about a year now. Some factories have even rejected Papaya’s manufacturing request or imposed a surcharge on production, according to reports.

Regardless, Papaya has always been one of the jobber market’s few remaining large-scale businesses. Many smaller businesses have distributed their goods to Papaya and reaped benefits from those transactions over the years.

However, the jobber market is expected to flounder even further if Papaya fails to restructure and revive the vibrant business it has had. Along with Forever 21, Papaya has been the driving force behind the growth of Korean-American manufacturers for over 20 years.

“The total value of Papaya’s business with other Korean brands in the jobber market was about $150 million at one point from what I know,” said an apparel business owner. “Papaya once had about 140 stores, but now that’s down to about 90. The distribution deals in total are probably still worth about $50 to $60 million.”

“The effect could be even bigger in the future if Papaya’s bankruptcy leads to it completely vanishing,” said Dan Lee, the chairman of San Pedro Wholesale Mart. “From what I know, Papaya recently filed for bankruptcy protection to restructure their lease commitment for some of their stores that haven’t done well. Anyhow, creditors including myself will be affected.”

Lee added: “From what I know, Papaya didn’t receive loans from banks or through ill-advised equity funding. Papaya will have to try to revive itself by suggesting new conditions that could convince the creditors for now.”

Ambiance owner Sang-beom Noh, who is also likely to suffer the biggest loss due to Papaya’s bankruptcy, said: “I’ve done business with them for such a long time. I’m not sure how much our loss will be since we didn’t even have a separate factory. We’ll have to wait and see, but I’m hoping Papaya will bounce back as they take up such a large portion of many brands’ distribution.”

By Moonho Kim