Sometimes a Chapter 11 filing allows a company to pause its debts, stop collection efforts, and buy time to negotiate with creditors. In other cases, a business might use a Chapter 11 bankruptcy to stop, or at least slow down, an undesired outcome.

In some cases, a Chapter 11 filing is a last resort for business owners to maintain control.

For Pat McGrath Brands, the company’s Chapter 11 bankruptcy filing on Jan. 22 came days before a Jan. 27 auction that would have sold off the company’s assets. Hilco Global had set a final date of Jan. 26 for bids.

“Hilco Global presents the opportunity to acquire the assets of luxury beauty and
color cosmetics brand Pat McGrath Labs, including collateral pledged by Pat McGrath
Cosmetics, LLC and Patricia McGrath,” the company, which specializes in asset sales, shared on its website.

Pat McGrath Brands has stopped the auction with its Chapter 11 bankruptcy filing.

Pat McGrath Brands saw its valuation slashed

After a swift rise, the 10-year-old Pat McGrath Brands saw a sudden drop in its valuation.

“It was valued at over $1 billion dollars when it received an investment from Eurazeo in 2018, soon after its launch into Sephora. BoF reported in 2021 that Eurazeo had quietly exited its investment, and reported earlier this year that another investor, Sienna Investment Managers, had marked down its stake in the brand by 88%, implying a valuation closer to €149 million ($174 million),” Business of Fashion reported.

In simple terms, the filing gives Pat McGrath Brands time to reset its finances rather than sell itself off at a steep discount.

Along with that valuation drop, the brand has gone through multiple rounds of layoffs. It continued to operate its own retail website, and its products remain in stock at Sephora, Macy’s, Ulta Beauty, and other chains.

Pat McGrath Brands files Chapter 11 bankruptcy

Pat McGrath Brands filed for Chapter Bankruptcy protection in the Florida Southern Bankruptcy Court, according to Pacer Monitor.

Chapter 11 is not a liquidation or a shutdown; it lets a company continue operating while it reorganizes its finances.

The filing shows assets and liabilities in the range of $100 million to $500 million.

“During this process, the company will continue operations in the ordinary course of business while working to restructure its balance sheet and to forge a path to thrive,” the brand said in a statement. “Pat McGrath Labs remains committed to its community, customers, partners, and stakeholders as it continues delivering its signature, high-quality products and culture-defining artistry and innovation.”

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McGrath’s name remains on the brand, but it’s not her sole focus.

“The bankruptcy filing also lands as McGrath takes on a high-profile role as beauty director for Louis Vuitton’s La Beauté line. The overlap has fuelled speculation about how the founder balances her creative focus while her namesake brand resets its finances,” Feminegra reported.

Pat McGrath Labs products are carried by Sephora.

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Pat McGrath Labs Chapter 11 bankruptcy: quick facts

  • Pat McGrath Labs filed for Chapter 11 bankruptcy on Jan. 22, 2026, in the U.S. Bankruptcy Court for the Southern District of Florida, allowing the cosmetics brand to continue operating while restructuring debt, Inforuptcy reported.
  • The filing came after the company canceled a planned asset auction and moved into a court-supervised restructuring process instead of liquidation, reported Cosmetics Business.

Analysts share why Pat McGrath Brands has struggled

Manessa Lormejuste, a chemist and product developer at Lorm·Co, told Beauty Independent that the retailer has struggled to balance premium pricing with repeat purchase behavior, particularly in eyeshadow.

“Eyeshadow is a shelf-stable category that consumers don’t repurchase often,” she said, adding that the brand’s roughly $128 palettes made long-term growth difficult without stronger replenishment categories. She also notes that while the brand introduced skincare, it lacked the clinical backing and hybrid color-skincare concepts that have reshaped product development in recent years.

The Business of Beauty Editor Brennan Kilbane blames McGrath.

“Pat McGrath Labs was Pat McGrath. She is the CEO, she is the founder, she’s the creative director. The buck stops with her,” she told FashnFly. “With final say on everything from product formulation to packaging, this all-encompassing control created a bottleneck that affected every part of the business. The result was a company where decision-making was slow and fragmented.”

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