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A bankruptcy trustee who has sued sales reps at a fizzled fashion firm for commissions they earned three years ago is now going after buyout firms that allegedly put the company under, The Post has learned.

Worth Collection, an upscale, New York-based women’s apparel label that has gone out of business, has lately seen its bankruptcy trustee threaten to sue ex-staffers over sales commissions dating back to early 2020 — with some getting written offers for cash settlements in the tens of thousands of dollars, according to court filings.

Now, US Bankruptcy Trustee Douglas Tabachnik is alleging that Worth Collection was pillaged by a pair of private equity firms – L Catterton Management and New Water Capital – in a leveraged buyout that was “rife with fraud,” according to lawsuits filed against the firms.

L Catterton, a $33 billion fund whose holdings include Equinox and Birkenstock, bought Worth in 2006 and sold it to Boca Raton, Fla.-based New Water in September 2016 for approximately $40 million, according to a WWD report.

But Worth became almost immediately “insolvent” after New Water saddled the company with a massive debt load and L Catterton used it as a piggy bank to pay insiders – officers and directors on Worth’s board, according to court filings.

The heavily redacted filings don’t reveal how much money the former Worth insiders allegedly took, but the trustee claims they “approved and directed” Worth to “enter into a transaction that was so ‘one-sided’ such that fraudulent intent may be inferred.” 

US Bankruptcy Trustee Douglas Tabachnik declined to comment on the allegations against the buyout firms. His lead counsel, Harley Goldstein of Goldstein & McClintock, said the redactions were at the request of Catterton and New Water and that Tabachnik “had hoped to make additional portions of those complaints public,” but that those efforts “have not yet borne fruit.”

New Water, which focuses on turnarounds of “lower or middle market companies” according to its website, did not respond to requests for comment. L Catterton also didn’t comment.

“It’s a classic LBO complaint,” said bankruptcy attorney Kenneth Rosen, in which Worth “took on $25 million in debt and the trustee says there wasn’t a chance in hell that that wouldn’t sink the company.”

It’s the latest twist in a bizarre case in which the bankruptcy trustee has sued at least 200 former stylists over the sales commissions they earned shortly before Worth’s bankruptcy filing — with some ex-employees receiving letters with cash demands that threaten to devastate their personal finances.

Most of the women “have already spent their money and don’t have it lying around,” Michele Baena, Worth Collection’s top stylist who is being sued for $52,000, told The Post. “To be slapped with this is very distressing — I’ve never been sued in my entire life.”

Founded in 1991, Worth catered to professional women who bought clothing from stylists or independent contractors. Customers would shop for the clothing at trunk shows typically held at their homes. 

The company was financially stable even though its growth began to slow down in 2012, according to the complaints. Prior to the leveraged buyout Worth’s debt was $2.4 million in 2015 when it had revenues of $78.5 million, profits of $1.4 million, and $5 million in cash. 

“The staggering debt resulting from the LBO caused [Worth’s] interest and financing-related expenses to skyrocket to $1.8 million,” compared to $23,000, according to the complaints. In 2016, Worth lost $1.6 million, which grew to a $9.3 million loss the following year.

Despite Worth’s “dire financial condition” New Water continued to “drain the insolvent” company by charging it consulting fees, according to the complaints.

Worth was forced into a Chapter 7 liquidation by its creditors in February 2020.

The redactions in the court filings obscure how much New Water lost, said distressed debt expert Adam Stein-Sapir of Pioneer Funding Group. Still, “It’s clear that the trustee is saying the private equity firms caused the financial ruin,” and according to the complaint, “They are both culpable.” 

Meanwhile, the stylists are scrambling to hire lawyers to represent them and feel unfairly targeted, several told The Post.

At least 30 of the stylists who are being sued for between $8,000 and $20,000 recently retained a Delaware attorney to represent them as a group, former stylist Andrea Greenspan told The Post.

Bankruptcy regulation allows creditors to look back and question payments a company makes 90 days prior to filing for bankruptcy protection and in this case the stylists were given the opportunity to sell the clothing at deep discounts and earn commissions of up to 50% just prior to the filing, according to court docs.

“We were helping a company we loved that was going through hell,” Greenspan said. “We are feeling anger and shock.”

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