CaaStle Gets $2.75M Bridge Loan to Plan Chapter 11 Filing and Weigh Strategic Transactions

CaaStle — the embattled fashion rental service that descended into chaos late last month — got a little bit of breathing room from a $2.75 million bridge loan, even as its troubles increased with a lawsuit alleging breach of contract and trademark infringement. 

The board told shareholders last week that the financing came from an existing investor affiliated with former director Scott Callon, according to a letter obtained by WWD. Up to another $2.75 million in funds was expected to be given if “the company and such investor can agree on a budget for expenditures in the coming weeks.”

Rather than setting CaaStle on its feet, the money is more a way for the company to buy time to figure out what comes next. 

“All loan proceeds will be used to fund CaaStle’s critical operations and expenses related to considering strategic transactions and planning for a Chapter 11 process,” the board said. 

Cofounded by Christine Hunsicker, CaaStle was one of fashion’s rental pioneers, powering rental options for the likes of Banana Republic, Macy’s and Express, pitching a service as a way to get more out of one’s inventory. 

But things fell apart quickly last month. 

Hunsicker resigned as chief executive officer and the board accused her of sharing doctored financial statements to investors and leaving the company with “a severe and immediate liquidity problem.” Audited financials from 2023 showed that CaaStle logged revenue of just $15.7 million last year with net losses of $81 million. The company relied on fundraising to a degree that’s unusual in fashion, if less so in tech, and over its 14 years raised $520.9 million while accumulating losses of $510.5 million.

While the board said “law enforcement authorities” are investigating, the company’s financial troubles have already landed in court.

Seven years ago, CaaStle started a subscription service with the retailer Express — dubbed Express Style Trial — that sent boxes filed with three items from the brand at a time.

But in December 2022, EXP Topco., a joint venture between the retailer and brand management firm WHP Global, acquired Express’ intellectual property. 

A suit filed by EXP in New York State Supreme Court on April 8 claimed that, “From that point forward, CaaStle infringed EXP’s trademarks by using them in connection with its Express Style Trial business.”

The suit said, “Hunsicker approached EXP in February 2024 with a proposed transaction by which Express Style Trial would be converted into a multi-brand service and its use of the Express name and Marks would be phased out within 12 months.”

EXP nixed that offer, but the two sides started negotiating a licensing agreement that would have CaaStle paying “millions of dollars in guaranteed minimum royalties to EXP,” according to the suit.

“On December 18, 2024, EXP proposed a change to address CaaStle’s concern about the open non-material issue,” according to the suit. “CaaStle’s general counsel, who had been negotiating on CaaStle’s behalf, responded that EXP’s proposed change ‘reads as we agreed in principle.’ That acknowledgement reflected the parties’ agreement on the final terms of the license agreement.”

But by that time, CaaStle is said to have been dealing with the scandal that led to Hunsicker’s departure. 

The license agreement was never actually signed and EXP and CaaStle reached a settlement. But payment was never made, Express Style Trial was shutdown and CaaStle is now struggling for survival. 

In its suit, EXP said it is also “investigating potential claims against other CaaStle executives, current and former CaaStle board members, and CaaStle affiliates, including P180 Inc., a company cofounded by Hunsicker to drive business to CaaStle.” P180 controls Vince Holding Corp. and has a stake in Altuzarra. 

EXP said the suit involves more than $1 million and alleges breach of contract, trademark infringement and Unjust Enrichment.

CaaStle said Wednesday that it “takes this matter seriously, and is committed to addressing the claims and setting the record straight. The settlement agreement with EXP was negotiated in good faith. It is important to note that Ms. Hunsicker did not play any role in negotiations with EXP, and CaaStle clearly communicated its commitment to wind down the site in an orderly fashion to provide the best experience for EXP customers per the terms of the settlement agreement. We deeply regret the impact Christine’s actions has had on CaaStle employees, partners, investors and customers.”