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Ascena, Hoping to Quell Bankruptcy Talk, Says it’s Meeting All Financial Obligations

Ascena Retail Group says it’s meeting all of its financial obligations, despite talk around the industry.

In response to a New York Post report that a bankruptcy might be close at hand, a spokesman for the company told Sourcing Journal via e-mail, “Ascena is in full compliance under its term loan, which is due in August 2022, and revolving credit facility and intends to remain so, is current on all obligations, and has substantial cash on its balance sheet. The company regularly engages with its lenders.”

Reports in the Post said a lender group was grousing that the Mahwah, N.J.-based Ascena wasn’t returning calls and, therefore, concerned that a bankruptcy filing might be brewing.

While the Ascena acknowledged that it’s paying its bills, the company did not address whether it was contemplating a bankruptcy filing. The notion arose earlier this year in connection to the closing of its Dressbarn operation. The company said in May that roughly 650 stores would go dark by the end of this year, and Ascena is in the midst of winding down the Dressbarn business.

In mid-July, Dressbarn chief financial officer Steven Taylor said, “We have received overwhelming landlord support for our plan, which will allow us to implement our wind down in a manner that provides  the best recovery for our landlords. Further, we are current, and expect to remain so, with our vendors and suppliers.”

Tim Hynes, head of North American research at Debtwire, said there’s a concern Ascena might get hauled into bankruptcy court. If Dressbarn were to file a Chapter 11 petition in the event not all landlords agree to certain rent concessions connected to the Dressbarn locations being closed, Ascena could be brought in through a cross-default. According to Hynes, Ascena has noted that it is not a guarantor, but because lenders wanted ensure their rights were preserved, they have retained a law firm in case a cross-default comes into play.

According to Hynes, Ascena had liquidity to the tune of $574 million for the third quarter ended May 4, which should be enough to operate the overall business through next year.

Meanwhile, Ascena is still waiting for the $210 million in cash that’s supposed to be paid for the sale of a majority stake in its Maurices discount chain, which was announced in May.