Gymboree Group Inc. has filed a voluntary Chapter 11 petition for bankruptcy court protection so it can wind-down operations and shutter all stores in an orderly fashion.
The children’s retailer and ten affiliates filed petitions late Wednesday in a U.S. bankruptcy court in Virginia. The company has asked the court to file its jointly administered cases under Case No. 19-30258. A Canadian subsidiary is expected to file for insolvency in the Ontario Superior Court of Justice. Gymboree said it intends to facilitate a wind-down of all its Gymboree and Crazy 8 stores. The company will likely disclose in the next day or two which liquidator it has selected to handle the going-out-of-business sales at the stores. Once that’s done and the bankruptcy court gives the okay, GOB sales will begin immediately. The entire wind-down process typically takes about three months. It also plans to try to sell its Janie and Jack business as a going-concern, as well as try to find buyers for its intellectual property and online platform for its core Gymboree brand.
According to the Chapter 11 petition, assets were listed at between $100 million to $500 million, while liabilities were pegged at between $50 million to $100 million. Court documents also indicate that the company has an $85 million credit bid from Special Situations Investing Group Inc., a pre-petition lender, for the Janie and Jack business and the Gymboree IP assets and e-commerce platform. The pre-petition lender has been selected as the Stalking Horse bid, and the $85 million will set the floor for where bidding will start at an upcoming bankruptcy court auction.
The company had been expected to re-enter bankruptcy court proceedings. On Dec. 4, the company disclosed that it had initiated a comprehensive review of strategic options, including a sale of the company, but emphasized that its stores would be open and stocked for the holiday season.
The so-called bankruptcy lingo for “Chapter 22” refers to second-time filers, a label apt for Gymboree as Wednesday’s filing represents the second time the children’s retailer has filed for Chapter 11 protection. The last time was two years ago.
Gymboree has been on the watch list of credit ratings agencies such as Moody’s Investors Service and Fitch Credit Ratings. The company operates 380 Gymboree stores in the U.S. and Canada, but its store count across all brands in the U.S., Canada and Puerto Rico total around 900.
According to the filing, the largest unsecured creditor is Hansoll Textile Ltd., Seoul, Korea, holding a trade claim of $12.1 million. Rounding out the top five unsecured creditors holding trade claims are: Tip Top Fashions Ltd., Ohaka, Bangladesh, $9.7 million; Pan Pacific Co. Ltd., Seoul, Korea, $7.1 million; Mawna Fashions Ltd., Ohaka Bangladesh, $5.6 million, and Concept Knitting Limited, Ohaka, Bangladesh, $5.3 million. Unsecured creditors holding trade claims are those who shipped goods or provided some service on just the promise payment. These creditors are different from secured creditors, typically lenders, who hold a security interest in property that can be sold to pay the debt obligations.