J. Crew Group Inc. said on Tuesday that a federal bankruptcy court in Richmond has confirmed its plan of reorganization, enabling it to exit Chapter 11 proceedings in early September.
The American clothing company was among the first of the major retailers to file for bankruptcy, and will be the first of those that include Neiman Marcus and J.C. Penney to exit.
One reason for the short stay in bankruptcy court is that the retailer garnered support from the majority of its stakeholders for its financial restructuring. The plan calls for the conversion of over $1.6 billion of secured debt into equity in the reorganized J. Crew.
“The confirmation of our plan of reorganization is another significant milestone in our path to transforming our business to drive long-term, sustainable growth for J.Crew and further advance Madewell’s growth momentum,” Jan Singer, J.Crew Group’s CEO, said. “Throughout the financial restructuring process, we have continued to honor our longstanding commitment to our customers of providing them with the products they love and the service they have come to expect. We thank our associates, customers, vendors, landlords and lenders for their support, which has enabled us to efficiently move through this process while navigating our business through the current environment.
J. Crew was unencumbered by lengthy battles with creditors as was the case with Neiman Marcus as hedge fund Marble Ridge and other unsecured creditors questioned the company’s transfer of its MyTheresa.com operation into a bankruptcy-remote entity, thereby sheltering its from the reach of creditors. While the bitter dispute was ultimately settled, so intense was the battle over the asset that Marble Ridge is now shuttering its doors after a Department of Justice preliminary report on alleged questionable tactics used by the hedge fund’s founder Dan Kamensky in connection with the use of confidential information in the case. A hearing to confirm Neiman’s plan of reorganization is set for Sept. 4, and if approved, will pave the way for the luxury retailer to exit bankruptcy proceedings later in the month.
J.C. Penney meanwhile is fielding bids from several parties, including one from its lenders. Others include a joint venture from Simon Property Group and Brookfield Property Partners, private equity firm Sycamore Partners and Hudson’s Bay Co. CEO Richard Baker. The one from its two landlords, Simon and Brookfield, is said to have the inside track. If they succeed, they will take over the going-concern operations component of the bid from the lenders.
And while everyone is working to get a sale done and avoid a liquidation, negotiations have dragged on. Sources said Penney’s is also trying to secure rent concessions from its two landlords. The company still has to select a stalking horse bidder before it can set a day for the sale auction.