Retail chain J. Crew Group file for chapter safety – trend and tendencies

J. Crew Group Inc. filed for chapter, unable to revive flagging gross sales of its preppy clothes line amid the coronavirus pandemic and crushed by debt rooted in a long-ago leveraged buyout.

The retail chain reached a take care of a majority of its lenders to transform $1.65 billion of debt into fairness, J. Crew mentioned in an announcement Monday.

Lenders led by Anchorage Capital Group, Blackstone Group Inc.’s GSO Capital Companions and Davidson Kempner Capital Administration are offering $400 million of financing that can permit the corporate to keep up operations through the Chapter 11 restructuring, in response to the assertion.

The chapter submitting in U.S. Chapter Courtroom in Richmond, Virginia, permits J. Crew to remain in enterprise whereas reducing its borrowings. Usually that would come with retaining the doorways open for its J. Crew and Madewell shops, however gross sales at these retailers vanished when the coronavirus compelled consumers to remain house and nonessential companies to close.

Even earlier than the virus unfold, the corporate was struggling as a result of consumers had been defecting to on-line retailers and shopper tastes had been altering. J. Crew had been attempting to rebound from some trend misses and complaints of poor-quality clothes.

Asset shuffle

The corporate managed to sidestep default as soon as earlier than in 2017, with a monetary overhaul that included shuffling belongings in a means that moved fast-growing Madewell out of attain of collectors.

The change did little to reverse the corporate’s fortunes, but it surely irked collectors and turned J. Crew’s identify right into a synonym on Wall Avenue for lopsided debt offers that depart lenders with weaker claims on firm belongings.

J. Crew was counting on an preliminary public providing of Madewell to lift capital and ease its heavy debt load, a legacy of the 2011 leveraged buyout by present homeowners TPG Capital LP and Leonard Inexperienced & Companions LP. The turmoil in monetary markets put an finish to that choice.

Madewell will stay a part of J. Crew as a part of the transaction help settlement the corporate reached with its lenders, in response to the assertion. About 71% of the corporate’s time period mortgage lenders and 78% of its so-called IPCo notes agreed to the deal, the corporate mentioned.

The corporate operated 182 J. Crew-branded shops, 140 Madewell shops and 170 manufacturing unit shops as of March 2, in response to current filings.

©2020 Bloomberg L.P.

(This story has been printed from a wire company with out modifications to the textual content)

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