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Report: J. Crew to Restructure Debt Amid Turnaround Efforts

Hampered by slow mall traffic and the promotional retail landscape, J. Crew’s next act is slow to materialize. To buy more time, J. Crew Group, Inc., is looking to restructure its approximately $2 billion of debt, according to reports.

To become more appealing to creditors, J. Crew is said to be creating a separate subsidiary for its intellectual property. This would allow the brand to potentially buy back its loans and bonds at a discount or offer creditors the opportunity to swap into the new debt holdings. Madewell would not be a part of the transfer, sources have noted. Though others have speculated that the successful sister brand could go up on the block.

The retailer, which was acquired by private equity firms TPG Capital LP and Leonard Green & Partners LP in a $3 billion leveraged buyout in 2011, has a $1.5 billion loan maturing in 2021 and $500 million in bonds maturing in 2019.

Last month, the Group reported total revenues are down 4% to $1,730.5, and a net loss of $24.6 million compared to $1,235.6 million in the first nine months of 2015. J. Crew sales dropped 6 percent to $1,445.5 million. Comp store sales decreased by 9 percent, compared to 12 percent in the same period in 2015. The one bright spot has been the company’s Madewell business, which is up 15 percent for the three quarters to $238.7 million, with comps up 4 percent.

Once a retail darling, the company has been plagued with challenges lately, which it’s actively working to overcome. Assortment has been a key focus, as the chain recognizes that it must do more to entice shoppers. That means it’s in with the company’s first athleisure collection, which is co-branded with New Balance, and out with its under-performing bridal business.

Earlier this year, the company also inked a deal to wholesale its namesake collection to Nordstrom, withan eye toward picking up higher-end consumers and extending its reach beyond its own doors.

The company is also working to optimize its sourcing and supply chain.