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Bankrupt J.Crew Eyes $130 Million in Rent Relief

Bankrupt J.Crew is hoping to save $130 million by the end of next year, now that it has gotten a break on some of its store leases.

On Monday, the retailer said renegotiated landlord lease terms should recoup cash savings of about $70 million this year, thanks to “one-time waivers and deferrals,” and $60 million in 2021, “assuming sales are in line with projections.”

So far, the company has reopened 458 stores, of 95 percent of its fleet, enabling “the vast majority” of furloughed associates to return to work, it said.

Separately in the bankruptcy case, the company has filed an amended joint pre-arranged Chapter 11 plan of reorganization for Chinos Holdings, Inc., the parent company of the J. Crew and Madewell nameplates. But this forging this plan with lenders doesn’t necessarily mean unsecured creditors are on board.

The Official Committee of Unsecured Creditors has asked the court to approve a confidentiality request to keep under seal a report from its expert valuation witness, The Michel-Shaked Group.

“The debtors, along with their secured lenders, have grossly undervalued the debtors’ business (and overvalued certain collateral assets) in order to push through a [reorganization plan] which shifts significant value to the debtors’ secured lenders at the expense of general unsecured creditors which are rightly entitled to such value,” the Committee charged in a court document.

“Following an extensive investigation and employing proper valuation methodologies, [the valuation experts] have determined that the enterprise value of the Debtors is actually $2.941 billion, not $1.75 billion as set forth in the Plan (which figure, while still woefully undervaluing the enterprise, has now been revised upwards by the Debtors to the amount of $1.84 billion),” the court document said.

A hearing on the request is set for Aug. 25 at 10 a.m..

When J. Crew filed its voluntary Chapter 11 petition on May 4, it said it had reached an agreement with 71 percent of its term loan lenders and 78 percent of those holding its IPCo Notes, as well as financial sponsors to restructure its debt. That agreement has lenders converting $1.65 billion of the company’s debt into equity in a reorganized J. Crew Group. The company’s existing lenders—Anchorage Capital Group, GSO Capital Partners and Davidson Kempner Capital Management, among others—provided $400 million in debtor-in-possession financing.