In 2018, Pat McGrath became one of the few Black founders in beauty to see her company valued at $1 billion.
Pat McGrath Labs had launched just three years earlier with a single gold pigment kit that sold out in minutes. The brand quickly built cult status through richly pigmented palettes, runway credibility, and luxury positioning. At the time of the billion-dollar valuation, the company was reportedly generating around $40 million in annual sales.
That valuation placed the brand in rare territory and embedded aggressive growth expectations.
A multiple at that level requires sustained expansion. Retail presence widened through Sephora and later into Ulta Beauty. Product cycles accelerated. Operational demands intensified. The brand that began as a tightly controlled luxury studio was now operating at the pace expected of a hyper-growth beauty company.
Prestige beauty became more competitive. Influencer-led brands gained share. Consumer preferences shifted toward minimalist aesthetics. Growth slowed. Liquidity pressure increased.
In January 2026, Pat McGrath Labs filed for Chapter 11 bankruptcy protection after a dispute with its lender, GDA PMG Funding, over the structure of its outstanding debt. The filing paused a planned asset sale and moved negotiations into court oversight.
Court documents revealed a breakdown in negotiations. McGrath stated she had acted at the direction of lenders for months and sought to remain in control of the brand’s future. GDA alleged financial mismanagement and additional borrowing at high interest rates rather than agreeing to recapitalization terms.
This week, the two sides reached a restructuring agreement.
Pat McGrath Labs will receive approximately $30 million in financing from GDA PMG Funding. The package includes $10 million in debtor-in-possession financing during the Chapter 11 process and at least $20 million in post-emergence working capital.
As part of the deal, Patricia McGrath will transition from Chief Executive Officer to Chief Creative Officer. An affiliate entity, GDA Luma, will hold a controlling equity interest in the reorganized brand.
Court filings show GDA will form a holding company that will own 100 percent of the membership interests in the restructured entity.
McGrath is expected to retain a significant equity stake, though the final ownership breakdown has not yet been disclosed. A full recapitalization is expected in the coming weeks, with Paladin Management Group serving as chief restructuring officer during the process.
For consumers, the immediate impact is continuity. Products remain available online and through retail partners. For the business, the structure has shifted.
The billion-dollar valuation accelerated expansion and embedded expectations that reshaped how the brand operated. The restructuring formalizes a new ownership framework in which financial control sits with the lender and creative direction remains with its founder.
Pat McGrath continues to shape the global beauty landscape. In 2025, she was appointed Creative Director of Beauty at Louis Vuitton.
The story of Pat McGrath Labs reflects how capital decisions influence growth, governance, and ownership in real time.
