Home International News 8 big box brands that are seeking bankruptcy protection amid COVID crisis

8 big box brands that are seeking bankruptcy protection amid COVID crisis

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Economies all over the world are suffering due to the Novel pandemic, and the global retail industry – which has been in a state of flux for the last few years – has been especially hard hit. The industry is facing its biggest challenge yet, with pushing many vulnerable international brands to the and the brink of shutting shop.

Here is a list of international brands which have are either bleeding cash or have filed for bankruptcy protection, brands in for a tough ride till the economy rebounds.

1

Designer jeans company True Religion has filed for Chapter 11 bankruptcy protection for the second time in three years, citing difficulties due to the coronavirus pandemic.

In a court filing, the denim retailer said it would have preferred to wait out the current period of lockdowns and instability in financial markets but “simply could not afford to do so”.

True Religion listed US$ 100 million to US$ 500 million in assets and liabilities in the court filing dated April 13.

The company said that bankruptcy was the only way to maximize value for shareholders and stay in business once stay-at-home orders are lifted and non-essential retailers can reopen. The company had already furloughed all non-essential employees, according to court documents.

“In the near term, and until our stores open up, we will be continuing as we have, to run our e-commerce businesses, in the same way we did prior to filing for Chapter 11,” Michael Buckley, Chief Executive Officer, True Religion was quoted by Reuters as saying.

True Religion, which was founded in 2002, rode the wave of popularity of denim, but has struggled in recent years amid the rise of athleisure and increasing competition from the jeans rivals. True Religion emerged from bankruptcy the first time around after less than four months.

2

Neiman Marcus Group LTD LLC announced that it has entered into a Restructuring Support Agreement with a significant majority of its creditors to undergo a financial restructuring, substantially reducing its debt load and interest payments and supporting continued operations during the COVID-19 pandemic and beyond. The binding agreement with holders representing over two-thirds of the company’s outstanding debt demonstrates broad commitment across creditor classes.

To implement the RSA, the company has commenced voluntary Chapter 11 proceedings in the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division. As part of the process, Neiman Marcus Group has secured debtor-in-possession financing of US$ 675 million from creditors to enable business continuity throughout proceedings.

Geoffroy van Raemdonck, Chairman and Chief Executive Officer of Neiman Marcus Group stated, “Prior to COVID-19, Neiman Marcus Group was making solid progress on our journey to long-term profitable and sustainable growth. We have grown our unrivaled luxury customer base, expanded our industry-leading customer relationships, achieved higher omnichannel penetration, and made meaningful strides in our transformation to become the preeminent luxury customer platform. However, like most businesses today, we are facing unprecedented disruption caused by the COVID-19 pandemic, which has placed inexorable pressure on our business.”

“My team and I appreciate the partnership and the steadfast support of all our stakeholders and Board of Directors through this process. The binding agreement from our creditors gives us additional liquidity to operate the business during the pandemic and the financial flexibility to accelerate our transformation. We will emerge a far stronger company. In a world that is changing, we are uniquely positioned to give our brand partners access to our loyal luxury customers like no other company. We will deliver that through the strength of our associate relationships and digital solutions,” continued van Raemdonck.

3

Stage Stores, Inc. announced that the company has filed voluntary petitions under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division.

The company will simultaneously solicit bids for a going concern sale of the business or any of its assets and initiate an orderly wind-down of operations. The company will terminate the wind-down of operations at certain locations if it receives a viable going-concern bid.

The health and safety of its associates and guests remains Stage Stores’ top priority as it takes a phased approach to reopening its stores in the coming weeks to commence the liquidation of its inventory. The company currently anticipates that the first phase of approximately 557 stores will open on May 15, 2020, the second phase of approximately 67 stores is expected to open on May 28, 2020 and the balance of the chain is expected to open on June 4, 2020. The company will provide updates as to the location and timing of stores that are opening on its website, www.gordmans.com, in due course.

Michael Glazer, President and Chief Executive Officer, commented, “This is a very difficult announcement and it was a decision that we reached only after exhausting every possible alternative. Over the last several months, we had been taking significant steps to attempt to strengthen our financial position and find an independent path forward. However, the increasingly challenging market environment was exacerbated by the COVID-19 pandemic, which required us to temporarily close all of our stores and furlough the vast majority of our associates. Given these conditions, we have been unable to obtain necessary financing and have no choice but to take these actions.”

Glazer added, “Our associates play a key role in running our stores and serving guests, and I would like to thank them for their hard work and dedication. We recognize that the actions we have taken in response to the market environment and COVID-19 have affected them both professionally and personally. We deeply appreciate their efforts going forward as we begin the process of reopening stores to conduct liquidation sales. We thank our guests for their business and support, as well as our vendors, who help us maintain our assortment of brand-name apparel and stylish home décor. We appreciate the willingness of our landlords and vendors to work constructively with us to try and avoid this outcome. We hope that their efforts and the actions we have taken to reposition the business over the last several months will help attract the right partner who is interested in our off-price concept.”

Glazer concluded, “The health and safety of our associates and guests is of the utmost importance to us. We will continue to follow health authorities’ recommendations and industry best practices as we reopen to ensure our associates and guests feel comfortable shopping in our stores.”

The company intends to seek approval for a consensual use of cash collateral to ensure it has the liquidity necessary to support its operations in Chapter 11.

The company has also filed a number of customary motions seeking court authorization to support its operations during the court-supervised process, including the continued payment of employee wages, salaries, and health benefits without interruption for those employees that are working during this time. As part of the wind‑down, the company expects to honor existing customer programs, including gift cards and returns, for the first 30 days after a store reopens. The Company anticipates that it will stop accepting any outstanding gift cards or honoring other customer programs after that time.

4

The ALDO Group Inc. announced that it sought and obtained an Initial Order pursuant to the Companies’ Creditors Arrangement Act (the “CCAA”) from the Superior Court of Québec (the “Court”).

In addition, the company has voluntarily applied for similar protection in the United States and is about to do the same in Switzerland. The company intends to use the proceedings to stabilize the business and build on its legacy in retail fashion.

Among other things, the Initial Order provides for a stay of proceedings in favour of the company for an initial period of 10 days, subject to extension thereafter as the Court deems appropriate, and the appointment of Ernst & Young Inc. as Monitor in the CCAA proceedings.

The company will work to complete its restructuring in a timely fashion and hopes to exit from the process as soon as possible and better positioned for long term growth.

David Bensadoun, Chief Executive Officer said: “ALDO is one of the world’s leading fashion footwear and accessory brands with a solid track record of growth and profitability for almost half a century. It is no secret that the retail industry has experienced rapid and significant change over the last several years. We were making strong progress with the transformation of our business to tackle these challenges; however, the impact of the COVID-19 pandemic has put too much pressure on our business and our cash flows. After conducting an exhaustive review of strategic alternatives, we determined that filing under CCAA and related proceedings is in ALDO’s best interest to preserve the company for the long term and survive through this challenging period.”

“Throughout the process, ALDO expects to carry on business while it develops and implements a comprehensive restructuring plan across the organization. With our deep fashion footwear heritage, experienced leadership team, extensive omnichannel capabilities and loyal customer base, we firmly believe that we will emerge from the restructuring process and from the challenges posed by the COVID-19 pandemic. We will come out stronger and well-positioned to continue leading the way in fashion retail,” added Bensadoun.

ALDO, Call It Spring and GLOBO’s eCommerce websites will remain open throughout the process. The company’s corporate stores, which are temporarily closed due to COVID-19, will re-open based on the guidelines set by local governments and health authorities.

ALDO will continue to be headquartered in Montreal, Quebec.

5

J.C. Penney Company announced that it has entered into a restructuring support agreement with lenders holding approximately 70 percent of JCPenney’s first lien debt to reduce the company’s outstanding indebtedness and strengthen its financial position.

The RSA contemplates agreed-upon terms for a pre-arranged financial restructuring plan that is expected to reduce several billion dollars of indebtedness, provide increased financial flexibility to help navigate through the Coronavirus (COVID-19) pandemic, and better position JCPenney for the long-term. To implement the Plan, the company filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas, in Corpus Christi, TX.

During this process, JCPenney will continue to be one of the nation’s largest apparel and home retailers with an expansive footprint of hundreds of stores across the U.S. and Puerto Rico and a powerful eCommerce site, jcp.com. JCPenney is welcoming customers back to select stores and continuing to offer its Contact-free curbside pickup service at all open stores. At the same time, JCPenney’s e-commerce distribution centers continue to fulfill online orders and customer care centers are answering inquiries as usual. The health and safety of associates, customers, and communities remains a top priority, and the company is gradually reopening stores and offices in a phased approach while following guidance from local and state orders.

“The Coronavirus (COVID-19) pandemic has created unprecedented challenges for our families, our loved ones, our communities, and our country. As a result, the American retail industry has experienced a profoundly different new reality, requiring JCPenney to make difficult decisions in running our business to protect the safety of our associates and customers and the future of our company. Until this pandemic struck, we had made significant progress rebuilding our company under our Plan for Renewal strategy – and our efforts had already begun to pay off. While we had been working in parallel on options to strengthen our balance sheet and extend our financial runway, the closure of our stores due to the pandemic necessitated a more fulsome review to include the elimination of outstanding debt,” said Jill Soltau, Chief Executive Officer of JCPenney.

Soltau continued, “Implementing this financial restructuring plan through a court-supervised process is the best path to ensure that JCPenney will build on its over 100-year history to serve our customers for decades to come. We believe the RSA and the widespread support we have received from our asset-based lenders and first lien lenders will allow us to pursue a financial restructuring on an expedited timeframe. We are also encouraged by the level of support we have received from our vendor partners, landlords, and other stakeholders, whose confidence in our business and our people is expected to contribute to a successful reorganization.”

“We have a newly refreshed, highly experienced team of retail executives who remain focused on rebuilding our business and restoring financial strength to JCPenney. This team has continued to innovate even during these challenging times, implementing substantial improvements to our flagship e-commerce platform to increase efficiency and ensure our loyal customers continue to have access to the products they need through elevated shopping experiences. I would also like to thank all of our outstanding associates for their continued dedication to our company and their passion for meeting and exceeding our customers’ expectations. We are continuing to serve our customers as we move through this process with a commitment to working seamlessly with our vendor partners and landlords. We look forward to emerging from both Chapter 11 and this pandemic as a stronger retailer, continuing to implement our Plan for Renewal, and building capabilities focused on satisfying customers’ wants and needs,” Soltau concluded.

6

Japanese apparel maker Renown Inc. filed for bankruptcy protection after the coronavirus pandemic hit sales sharply in recent months.

Founded in 1902, Tokyo-based Renown is known for its D’urban and Arnold Palmer brands. It reached the peak of its scale in the 1990s but slipped into decline, hurt by the apparel industry’s shift to online sales from department stores and other brick-and-mortar shops.

Renown merged operations with D’urban in 2004. In 2010, it welcomed Ruyi, a Chinese group spanning textiles to apparel, as an investor. Ruyi brought brands including Aquascutum, which had previously been owned by Renown.

As the spread of the virus has prompted people to stay home, Renown’s sales at retail stores fell 42.5 percent in March from a year before. They plunged 81 percent in April when major department stores, its major sales channels, suspended operations amid the pandemic.

The maker of D’urban brand suits posted a net loss of ¥6.7 billion in the March-December period in 2019 after failing to collect ¥5 billion in outstanding debts from a Hong Kong-based affiliate of the Shandong Ruyi group. The Chinese textile group holds a 53 percent stake in Renown.

Renown came under the control of the Shandong Ruyi group in 2010 to restore its financial health.

7

K.Crew Group, Inc. announced it has reached an agreement with its lenders holding approximately 71 percent of its term loan and approximately 78 percent 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 (“TSA”), 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 (“DIP”) 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, Chief Executive Officer, 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.”

“J.Crew and Madewell are two classic American brands with deeply loyal customers. We look forward to supporting Jan, Libby and the management team to recognize their full potential. The significant deleveraging contemplated by this agreement, coupled with J.Crew Group’s strategy to strengthen its robust e-commerce platform to drive continued growth in its direct-to-consumer segment, will position the Company for future success,” said Kevin Ulrich, Chief Executive Officer of Anchorage Capital Group.

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.

Weil, Gotshal & Manges LLP is serving as legal counsel, Lazard is serving as investment banker and AlixPartners, LLP is serving as restructuring advisor to J.Crew Group, Inc. Anchorage Capital Group and other members of an ad hoc committee are represented by Milbank LLP as legal counsel and PJT Partners LP as investment banker.

8

Reitmans (Canada) Limited announced that it is seeking protection under the Companies’ Creditors Arrangement Act in order to facilitate its operational, commercial and financial restructuring. Application under the CCAA will be heard by the Québec Superior Court.

The CCAA process will allow the company to implement a restructuring plan that addresses the impacts of COVID-19 in order to build a more resilient organization that will be positioned for long-term success. Throughout this process, the Company will remain fully operational through its brands’ e-commerce websites; all physical stores will re-open in conformity with provincial and regional governmental guidelines. As the restructuring gets underway, the Company will look to optimize its retail footprint in Canada to emerge from this process in a stronger state. The retail landscape has been in constant flux over the past several years, resulting in the evolution of consumer behavior and purchasing patterns. Reitmans has implemented a successful digital-first strategy, amongst other omnichannel initiatives, to drive sustainable growth in this evolving retail environment. However, the COVID-19 pandemic forced the closure of all retail stores, and pushed the retail industry into a new and unknown era.

Stephen Reitman, President and Chief Executive Officer of Reitmans, and grandson of the Company’s founders, said: “Filing for protection under the CCAA is truly the hardest decision we have had to make as an organization in our almost one hundred years of history, but this pandemic has left us no choice – we believe that this is the only course of action to ensure we remain successful in the future.”

Reitman added: “We have many strengths: we’re the Canadian leader in specialty retail, we have a strong leadership team and talented employees, great national brands, an omnichannel retail strategy with robust online sales, and most importantly, loyal customers who have been shopping on our websites at a record pace since the start of the pandemic. We will dedicate ourselves to the restructuring of our business, and then we’ll carry on with what we do best: offering affordable fashion and great service to our customers and communities for many years to come.”