Footwear and handbag retailer Nine West Holdings filed for bankruptcy late Friday, revealing $1.6 billion in debt.
The company is shedding two of its major brands. The proposed Chapter 11 reorganization includes a sale of the intellectual property associated with its Nine West and Bandolino lines to Authentic Brands Group for $200 million. (ABG owns Juicy Couture and Aéropostale.) The deal also includes certain working capital assets.
Nine West plans to focus on its Anne Klein and One Jeanswear Group brands and operate normally during the bankruptcy process.
Nine West said it reached a restructuring agreement with holders of more than 78% of secured term debt and 89% of its unsecured term debt.
According to Fitch Ratings’ Leveraged Finance group, first-lien term loan lenders are to be paid in full in cash. Holders of an unsecured term loan facility would receive new second-lien debt and 100% of the equity of the reorganized company.
Recoveries are expected to be weak for holders of more than $700 million in bonds, said Fitch.
The Chapter 11 filing was precipitated by a missed interest payment on March 15 due to holders of the company’s $427 million of 8.25% notes. Nine West lacked the access to the credit markets that would have enabled it to refinance the notes, said Fitch.
Nine West has been highly leveraged since being part of the takeover of Jones Apparel Group by private equity sponsor Sycamore Partners in 2014. After the $2.2 billion transaction, Sycamore split the Jones business into different groups. Nine West Holdings operates as a separate portfolio company under Sycamore’s umbrella.
In addition to its high debt load, Nine West’s department store customers “faced declining mall traffic and online competition, which, in turn, pressured Nine West’s revenues and cash flow,” said Fitch senior director Sharon Bonelli. “Adverse trends in the company’s own footwear and handbag business, including quality issues and a lack of fashion-forward products, compounded these challenges.”
Fitch expects more large retail chains to file bankruptcy this year. Retailers judged to be a material default risk include Neiman Marcus Group, Sears Holdings, FULLBEAUTY Brands, David’s Bridal, TOMS Shoes, Indra Holdings, Everest Holdings, Things Remembered, NYDJ Apparel, and Vince.
Photo: Jamie, Wikimedia Commons, CC BY-SA 2.0