Although Ascena Retail Group Inc. has said it wasn’t planning to file for bankruptcy court protection, at the end of the day it just might have to go that route anyway.
Speculation this week says the women’s specialty store group could be headed to a Chapter 11 filing within days after persistent chatter forced Ascena to downplay bankruptcy talk this past March. And the retailer’s May 28 update stated that it was evaluating all options to preserve the business. Moreover, the company recently approved $5.5 million in executive retention bonus payouts last month, a move many firms opt for to keep key executives on board for the post-bankruptcy journey ahead.
The company also has been in talks with creditors for the past month, trying to work out a plan that could help wipe out a portion of Ascena’s debt in exchange for equity in a newly reorganized company. Now in the very late stages of those discussions, the thinking is that the retailer could file once it finalizes an agreement with creditors. Bloomberg reported that lenders, including Eaton Vance Corp., would assume control of the company in an agreement that could eliminate $700 million of its $1.1 billion debt loan. It also said that a filing could result in the closure of 1,200 stores. Executives at Ascena could not be reached for comment.
All nonessential retailers temporarily closed their stores as state and local governments mandated shelter-in-place orders to stem the coronavirus outbreak. Beginning in May, the company has been cautiously reopening its stores. On May 28, the company said the pandemic “significantly disrupted its business” given that retail stores generate the majority of its revenue and cash flow.
But if the struggling retailer is blaming COVID-19 for the most recent turn in its fortunes, that wouldn’t be entirely accurate. The company has been in the deep end for some time, which eventually led it to sell a majority interest in its Maurices discount apparel operation last year. Subsequent to that came the decision to shut down its value chain Dressbarn. As for other brands in its portfolio, Ascena had tried to sell it plus-size nameplate, most notably Lane Bryant and Catherine’s, but wasn’t able to find any buyers. The company’s best known brands are its Ann Taylor and Loft businesses, which it acquired from Ann Taylor Corp. in 2015 in a $2.2 billion deal.