J.Crew Group has filed to begin Chapter 11 bankruptcy proceedings in federal bankruptcy court in the Eastern District of Virginia, saying it has reached a deal with its lenders to convert about $1.65 billion of debt into equity.
The company, which operates the J.Crew and Madewell brands, is the first national retailer in the United States to file for bankruptcy protection since the coronavirus pandemic.
J.Crew said it has secured commitments for a debtor-in-possession financing facility of $400 million and committed exit financing from Anchorage Capital Group, GSO Capital Partners, and Davidson Kempner Capital Management. The company reached agreements with holders of approximately 71% of its term loan and 78% of its IPCo notes. It said it expects to stay in business and emerge from bankruptcy as a profitable company.
In September, J.Crew said that Madewell Group, its fast-growing denim brand was holding a road show and preparing to split from the parent company and list on the New York Stock Exchange or Nasdaq. Madewell will now remain part of J.Crew Group and Libby Wadle will continue as chief executive officer, J.Crew said.
U.S. retail sales fell 8.7% in March, the deepest drop on record, as stores remained closes under social-distancing guidelines.
“Madewell was supposed to be the saving grace. This is an asset that lenders were fighting over for years,” Reshmi Basu, who tracks retail bankruptcies at Debtwire, said. “But no one wants to do an IPO right now, especially a retail IPO. COVID-19 upturned everything.”
“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,” chief executive officer Jan Singer said in a statement.
J.Crew Group posted a net loss of $78.8 million for its most recent fiscal year, up from a loss of $120 million the year before.
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