The coronavirus has claimed another retail victim: this time, it’s Ascena Retail Group, which filed a voluntary Chapter 11 petition Thursday.
The company said the pandemic has “disrupted meaningful progress” to optimize its balance sheet and accelerated the need for a proactive step to protect the business. The filing wasn’t unexpected, though there was speculation surrounding it for the last two months, and credit analysts raised questions of possible refinancing risks back in March.
As part of the filing, made in a bankruptcy court in Richmond, Virginia, Ascena has secured $150 million in new money as part of its debtor-in-possession financing facility. The new money, plus cash on hand and cash flow from ongoing operations, should suffice for its operational and restructuring needs, Ascena said. The company has also secured what it calls a restructuring support agreement, or RSA, with the approval of over 68 percent of its secured term lenders. The agreement essentially restructures the company’s debt and lowers the total by $1 billion.
“The RSA formalizes our lenders’ overwhelming support for a comprehensive plan to deleverage our balance sheet, right-size our operations and inject new capital into the business,” Ascena’s interim executive chair Carrie Teffner said. “We expect to move through this process on an expedited timeframe as our talented leadership team, established over the last year, stays focused on generating profitable growth and driving value for customers and stakeholders.”
Ascena will close additional stores as part of the restructuring, as well as shut its Catherines plus-size operation. The company has entered into an agreement with City Chic Collective Limited to sell the Catherines intellectual property assets and transition the operation to an e-commerce business, subject to higher offers in a bankruptcy court auction. Ascena didn’t state how many more stores it will close for its remaining retail nameplates, though it did say the store closings will include a “significant number of Justice stores and a select number of Ann Taylor, Loft, Lane Bryant and Lou & Grey stores.” The company also said it will exit its stores across the brands in Canada, Puerto Rico and Mexico. Previous speculation is that a total of 1,200 doors will be closed.
“Ann Taylor, LOFT, Lane Bryant, Justice and Lou & Grey have incredibly loyal customers who are at the center of everything we do. These iconic brands have significant long-term potential and we continue to deliver on their mission to provide all women and girls with fashion and inspiration to live confidently every day,” CEO Gary Muto said. “This comprehensive restructuring, as well as the actions we are taking to optimize our brand portfolio and store fleet, mark a new start for our company and will allow us to expand our customer-focused strategies across her mobile, online, and store experiences.”
He added, “We have a clear vision for our future and we will continue delivering meaningful experiences for our customers each and every day. We look forward to our continued partnerships with our valued vendors, landlords and other stakeholders as we emerge from Chapter 11, and this pandemic, as a stronger company.”