The clock is ticking fast for J. Jill.
Sept. 11 is the deadline for the women’s specialty chain to complete a restructuring agreement out-of-court with lenders, or end up in bankruptcy court.
After five extensions of a forbearance agreement, the chain said Tuesday that it has the support of majority of the company’s shareholders in connection with a financial restructuring that would waive past non compliances and provide the retailer with additional liquidity. It has entered into a transaction support agreement with lenders holding over 70 percent of the company’s term loans.
The TSA requires the consent of the term loan lenders, and if received, would extend the maturity of the participating debt by two years through May 2024. The agreement also provides for a “financial covenant holiday until Q4 2021,” as well as a new money investment of no less than $15 million in the form of a junior term loan facility. J.Jill said it is now in talks with lenders to obtain the required consents.
The closing of the out-of-court transaction is conditioned on the satisfaction or waiver of certain conditions precedent, including finalizing all definitive documents and achieving certain participation thresholds, the company said. It noted that the transaction also requires the participation by lenders holding at least 95 percent of the outstanding principal amount of the company’s term loans by Sept. 11.
If J.Jill fails to receive the approvals, the TSA mandated that the company file a pre-packaged reorganization plan in connection with a bankruptcy filing under a voluntary Chapter 11 petition. Such a filing would also require additional financing in the form of a $75 million debtor-in-possession facility to enable the retailer to continue operations under bankruptcy court protection. If the latter becomes the path J.Jill takes, the company on Tuesday said it “would be a swift process in which all vendor claims would be unimpaired and paid in full, and from which the company would emerge with a strong and healthy balance sheet.”
“J.Jill has been buoyed by a strong direct business and a loyal customer base, and the transaction proposed in this agreement will enable our company to emerge from this challenging stretch in a position of strength,” Jim Scully, J.Jill’s interim CEO, said. “I am grateful for the confidence and support of many of our lenders and shareholders as we work together to advance the best interests of our employees, vendors and customers and position our company for long-term success.”
Credit ratings firm S&P downgraded Jill Acquisition LLC, a subsidiary of J. Jill Inc. “We believe the rapid performance deterioration amid the coronavirus pandemic in addition to weak performance over the past several quarters have led to this juncture,” S&P said.
“We view the proposed transaction as distressed and representing less than the original promise of the secured term loan,” S&P said. It lowered its issuer credit rating on Jill Acquisition LLC to “CC” from “CCC-” and our issue-level rating on its senior secured credit facility to “CC” from “CCC-“. S&P expects to lower its issuer credit rating to “SD,” representing selective default upon the completion of the transaction.