Fashion Designer Ralph Rucci is having a serious cash flow problem. According to people familiar with the company Rucci has met with a bankruptcy lawyer in the last few weeks and is $6.4 million in debt with about 150 creditors breathing down his neck.
He cut his 15,000 sq ft New York showroom down to 8,000 sq ft in the last year and New York Magazine reported this month he suddenly canceled an expensive runway show at Fashion Week.
Rucci’s buddy and ex-Goldman partner Guy Muzio could be faced with losing his investment in his friends company unless the House of Rucci comes up with some cold hard cash fast; and the list of mills to model agencies that haven’t been paid keeps on growing. According to people familiar with company’s finances Ralph also personally guaranteed his office lease so it’s unclear if a chapter 11 could even stop his SoHo landlord from coming after his personal bank account. Ouch!
When reached by phone for comment tonight Ralph’s sister, Rosina, flat-out denies the finance troubles. When asked what she thinks about being the highest paid person (salary around $300k) on the Rucci staff she said as a PR person she doesn’t know anything about the finances or staff salaries. Humm except she just denied the idea of bankruptcy,which is a question relating to finances, so doesn’t that seem like an odd response?
Of course if Ralph actually files bankruptcy it’s tough to tell who would be on the top of the creditors list – secured private investors or Neiman Marcus who prepays him each quarter before the goods are delivered?
UPDATE 2-17-12: A peer I worked with at the New York Post, James Covert, thinks Rucci is near bankruptcy also and has some interesting color on how the Fashion Designer has burned through cash. Covert has covered the Fashion biz beat for years and has a good handle on when these free spending designers are not telling the public the truth. Covert mentions Rucci had a $1 million tax liability problem recently and according to a source I spoke with who is familiar with the designer’s finances the government actually came knocking after the House of Rucci wasn’t paying payroll taxes. It’s unclear if he’s made due on the $1,020,000 government debt yet.
Give it a read here.