Karmaloop ‘Starstruck’ Over Celebrity Interest

Online streetwear retailer Karmaloop Inc., which was sold to one of its creditors Thursday, drew interest from a number of celebrities—including Kanye West, according to people familiar with the sale process.

“We were doing our best to avoid being starstruck,” said Michael O’Hara, Karmaloop’s investment banker.

Entertainment moguls, well-known athletes and at least 50 other prospective purchasers held meetings with Karmaloop’s professionals during a months-long effort to find a buyer for the bankrupt company.

“They ranged from your traditional private equity firms all the way through to Kanye West,” said Brian Davies, Karmaloop’s chief restructuring officer.

Mr. Davies said Karmaloop’s core demographic, those between the ages of 18 and 35, was particularly attractive to many of the sports stars and other celebrities.

“For a lot of these athletes and a lot of these stars, that was the demographic they are looking at,” he said.

Both Mr. O’Hara and Mr. Davies said Karmaloop may still partner with a celebrity, which could add significant value to the company’s business.

“There are a lot people out there who think that just by adding their name to the site, they could drive a lot of traffic,” Mr. Davies said.

As for Mr. West, who ultimately declined to make an offer for the company, Mr. O’Hara said Karmaloop would have been thrilled to have struck a deal with the hip-hop star.

Despite the extensive marketing and sale process, in which a total of 302 prospective purchasers were contacted, Karmaloop ultimately failed to attract any competing offers ahead of a court-ordered deadline.

On Thursday, U.S. Bankruptcy Court Judge Mary Walrath signed off on a deal that will hand control of the business to Comvest Capital II LP, Karmaloop’s primary lender.

Comvest, based in West Palm Beach, Fla., will swap $13 million of its debt for equity in the reorganized company and plans to continue to operate the business, a company spokesman said Friday. The deal is expected to close sometime next week.

Boston-based Karmaloop said a competitive retail environment and an “ambitious in retrospect” plan to launch a cable-television channel led to liquidity problems and eventually to the bankruptcy in March.

In court papers, Karmaloop said it spent $14 million trying to launch the TV station, which was supposed to “create a cross between a QVC type retail channel mixed with content that appealed to the company’s target demographic.”

Founded in 1999, Karmaloop sells more than 400 apparel brands entirely through its website.

Write to Tom Corrigan at [email protected]