Pat McGrath Labs filed for Chapter 11 bankruptcy protection on Jan. 22, after a last-ditch attempt to secure new investment or an operational partner fell through.
The company will continue to sell its celestial Mothership palettes, MatteTrance lipsticks and other products as it restructures, a spokesperson told The Business of Beauty. And Pat McGrath herself has pledged $1 million to pay critical vendors and compensate employees at the brand she founded more than a decade ago, and where she is still founder and chief executive.
But though Pat McGrath Labs will continue to operate more or less as-is in the near-term, what its long-term future looks like is an open question. The filing is a crash landing for a brand that has seen its shine fade considerably since its 2015 launch with the Gold 001 metallic eyeshadow kit, and a 2018 funding round that valued the company at $1 billion. After a succession of investor exits, that valuation sat closer to $174 million, as the brand suffered from significant debt, repeated layoffs and allegations of mismanagement.
In an affidavit filed on Monday, McGrath wrote that the brand’s “financial issues stem from an unsustainable capital structure, accumulated legacy liabilities, and liquidity constraints that have impaired [the brand’s] ability to operate efficiently and strategically.” It specifies that its primary debt comes from a loan secured in April 2025 from GDA PMG Funding, an entity affiliated with the Miami-based investor Gabriel de Alba. Pat McGrath Labs alleged it received $17.5 million, while GDA contends that it is owed more than $43 million.
Pat McGrath Labs was unable to repay or refinance the loan, and in June opened a bank account controlled by GDA, significantly reducing its access to operating cash. In October, GDA served a default notice, and in December retained US financial firm Hilco Global to sell the brand’s assets.
An auction was scheduled for Jan. 27, and Hilco had contacted potential buyers specialising in distressed assets, according to three sources. Two people who looked at the business during the Hilco process told The Business of Beauty that the company pulled in about $50 million in sales last year. In its filing, the brand estimated assets and liabilities of $100 million – $200 million, and between 200 and 999 estimated creditors.
“This was a restart, essentially,” said one source who had looked at the business. “Everything is a deep hole to fill.”
The Pat Factor
The question that may determine Pat McGrath Labs’ fate is how McGrath herself fits into the business once it emerges from bankruptcy.
Since founding Pat McGrath Labs in 2015, McGrath has been inextricable from her namesake brand, which was originally intended as a vehicle to bring her editorial-level makeup artistry to the beauty market.
“I founded the brand because I wanted to take what I was doing backstage and bring it to people directly,” wrote McGrath in the affidavit.
This strategy initially resulted in small-batch product drops tied to specific runway moments, like the Lust 002 lip kit, with a vinylic finish that sprang from the faces of models at Versace. A key inflection point occurred when the brand secured a $60 million investment from French PE firm Eurazeo at a $1 billion valuation and launched into Sephora. Suddenly, McGrath’s pet project became a global beauty business. As the company grew and became more complex, it became difficult to quickly capitalise on her runway work.
The saga of Pat McGrath Labs blends a few cautionary tales — of courting private equity, of unicorn valuations, of creative-commercial tension — into a lightning rod for beauty industry discussion.
“The news around Pat McGrath Labs isn’t about makeup,” wrote skincare label Rodial founder Maria Hatzistefanis on Linkedin last week. “It’s about what happens when creative dominance and commercial reality drift apart.”
The two people who participated in the Hilco process said they assumed McGrath would continue to steward the company, providing her creative input and ensuring the brand remains founder-led. “You’d want to partner directly and tightly with her,” one of the people said.
“She is the equity of the brand,” said Rishum Butt, a beauty industry consultant. “She’s what lends it cultural weight and capital.”
Asked if McGrath would continue in the CEO role during the bankruptcy proceedings, a spokesperson replied: “Business as usual.”
It remains to be seen whether the company can find an acquirer whose vision for the brand syncs up with McGrath’s. One possibility floated by the participants in the Hilco sale process was to abandon its premium positioning and operate as a mass label, similar to a Max Factor. Once a mainstay in Sephora stores worldwide, Pat McGrath Labs has already winnowed its door count, with fans noting an influx of discounted products at off-price retailers like TJ Maxx.
The artist already has an off–ramp in her artistic director role for Louis Vuitton’s new cosmetics line, and continues to work on fashion shows and editorial projects as she has for decades, with remarkable consistency.
But it’s even harder to imagine a Pat McGrath Labs without Pat McGrath. The current makeup landscape is dominated by artist-forward brands, from Makeup by Mario to Danessa Myricks to Westman Atelier.
Her inventory is still coveted by a cohort of makeup obsessives, who await its regular Mothership palette drops with the fervent patience of sneakerheads and who voiced their shock on social media in the hours after the bankruptcy was reported.
“Nooo pat!!!!! Please don’t stop,” read one reply to the news on X. On Instagram, users said they were “heartbroken” and “devastated” while praising the brand’s formulas and packaging.
They’re not in thrall to the glittering Italian-made pigments, but to their creator, who still toils, season after season, behind the scenes to set the standard for beauty artistry. And one fact remains sure: McGrath is not done working.
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