Lugano Holding's Restructuring Under Chapter 11 as CODI Navigates Financial Challenges

Compass Diversified Holdings (CODI) disclosed that its Lugano subsidiary has initiated Chapter 11 bankruptcy proceedings in the United States, a strategic move aimed at optimizing the unit’s asset base. CODI Chief Executive Officer Elias Sabo emphasized that pursuing Chapter 11 restructuring represents the most effective path forward for preserving Lugano’s enterprise value during this challenging period.

Isolated Impact on CODI’s Operations

The bankruptcy proceeding is limited to the Lugano entity alone, leaving CODI’s eight other business units unaffected. These remaining subsidiaries continue to demonstrate robust operational performance and maintain healthy cash generation across their respective market segments. The separation means Lugano will be deconsolidated from CODI’s financial statements beginning in Q4 2025, reflecting its new standalone restructuring status.

Financing Support and Creditor Coordination

To facilitate an orderly restructuring process, CODI—serving as Lugano’s primary secured creditor—has committed to extending debtor-in-possession financing. This financial backstop enables Lugano to operate and navigate the bankruptcy process while pursuing debt reorganization objectives.

Meanwhile, CODI management continues engaging with its senior lending syndicate and bond investors to negotiate restructuring terms. The company is simultaneously advancing its financial restatement project and preparing requisite regulatory disclosures for the Securities and Exchange Commission, working to maintain stakeholder alignment throughout the process.

This development underscores CODI’s efforts to compartmentalize financial stress while preserving operational viability across its diversified portfolio.