J. Crew files for bankruptcy; Madewell to remain part of J.Crew
J.Crew Group announced it has reached an agreement with its lenders holding approximately 71% of its Term Loan and approximately 78% of its IPCo Notes, as well as with its financial sponsors, under which the Company will restructure its debt and deleverage its balance sheet, positioning J.Crew and Madewell for long-term success.
Under the terms of the Transaction Support Agreement, the Company’s lenders will convert approximately $1.65 billion of the Company’s debt into equity.
To facilitate the restructuring contemplated by the TSA, the parent company of J.Crew Group, Inc., Chinos Holdings, Inc. and certain affiliates, have filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Eastern District of Virginia.
The Company has secured commitments for a debtor-in-possession financing facility of $400 million and committed exit financing provided by existing lenders Anchorage Capital Group, L.L.C., GSO Capital Partners and Davidson Kempner Capital Management LP, among others.
Subject to Court approval, the DIP financing, combined with the Company’s projected cash flows, is expected to support its operations during the restructuring process.
As part of the TSA, Madewell will remain part of J.Crew Group, Inc.
Libby Wadle will continue in her role as CEO of Madewell.
“This agreement with our lenders represents a critical milestone in the ongoing process to transform our business with the goal of driving long-term, sustainable growth for J.Crew and further enhancing Madewell’s growth momentum,” said Jan Singer, CEO, J.Crew Group.
“Throughout this process, we will continue to provide our customers with the exceptional merchandise and service they expect from us, and we will continue all day-to-day operations, albeit under these extraordinary COVID-19-related circumstances.
As we look to reopen our stores as quickly and safely as possible, this comprehensive financial restructuring should enable our business and brands to thrive for years to come.”
The Company has filed a series of customary “first day” motions with the Bankruptcy Court seeking to maintain its operations during the restructuring process to help facilitate a smooth transition into Chapter 11.
Note that in 2011, TPG Capital LP and Leonard Green & Partners LP privatized J.Crew in a $3 billion leveraged buyout.
Recent bankrupt retailers include Forever 21 and Pier 1 Imports.
Other retailers that may file for bankruptcy in the near future include: Neiman Marcus, JCP, GNC, and AEO. Note that Gaps (GPS) has been suffering from soft retail sales. Lands’ End (LE) is also suffering from soft sales.
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