J. Crew files for bankruptcy as preppy retailer succumbs to COVID-19 fallout


(Reuters) – J. Crew Group Inc filed for bankruptcy safety on Monday with a plan to hand over management to lenders, including to a listing of brick-and-mortar retailers pushed to the brink by widespread retailer closures in response to the COVID-19 pandemic.

The New York-based chain, recognized for preppy clothes at occasions worn by former first girl Michelle Obama, filed for bankruptcy in a Virginia federal courtroom with an settlement to remove $1.65 billion of debt in trade for ceding possession to collectors.

J. Crew is the primary high-profile retailer to search bankruptcy safety for the reason that coronavirus unfold throughout the globe, prompting authorities officers to order companies deemed nonessential to quickly shut.

It is probably going not the final. Department retailer chains Neiman Marcus Group and J.C. Penney Co Inc (JCP.N) are considering bankruptcy filings amid the disaster, Reuters beforehand reported.

Anchorage Capital Group, Blackstone Group Inc’s (BX.N) GSO Capital Partners and Davidson Kempner Capital Management maintain vital parts of J. Crew’s senior debt and are in line to take management of the corporate.

They are additionally offering about $400 million of recent financing to support J. Crew’s operations, whereas it navigates Chapter 11 bankruptcy proceedings, the corporate mentioned in a press release.

In addition to cancelling debt, J. Crew plans to completely shut some shops, although the ultimate quantity it plans to shutter has not but been decided, an individual conversant in the matter mentioned.

The virus outbreak compelled the corporate to quickly shut its practically 500 J. Crew, J. Crew Factory and Madewell shops. In addition, the financial fallout and market turmoil stemming from the general public well being disaster resulted within the firm shelving plans for an preliminary public providing of its Madewell enterprise.

Madewell will stay a part of J.Crew Group and Libby Wadle will proceed in her position as chief govt officer of Madewell, the corporate added.

J. Crew had deliberate to use proceeds from the IPO to scale back its debt fairly than use bankruptcy to deal with its strained funds, the individual conversant in the matter mentioned.

Before the pandemic, J. Crew was already struggling together with different conventional brick-and-mortar retailers to compete amid a shopper shift to on-line buying.

It additionally suffered after a strategic misstep of elevating costs that turned off some consumers. Talks in 2014 to promote J. Crew to Japan’s Fast Retailing Co (9983.T), the proprietor of the Uniqlo attire chain, fell aside.

J. Crew was taken personal in 2011 by TPG and Leonard Green & Partners in a roughly $three billion leveraged buyout, and their investments are actually anticipated to be worn out, in accordance to the individual conversant in the matter.

The retailer had prevented bankruptcy in 2017 in a take care of collectors that diminished complete debt and pushed out due dates on obligations.

FILE PHOTO: A buyer walks right into a clothes retailer J.Crew retailer in Manhattan, New York, March three, 2014. REUTERS/Mike Segar

But its struggles continued. Millard “Mickey” S. Drexler, a longtime chief of the chain recognized for his trend acumen who additionally at one level helmed Gap Inc (GPS.N), conceded he misjudged how technological developments would alter the retail panorama.

He stepped apart as J. Crew’s chief govt officer in 2017, and final 12 months relinquished his seat as board chairman.

J. Crew listed each belongings and liabilities within the vary of $1 billion to $10 billion within the voluntary Chapter 11 doc.

Reporting by Mike Spector in New York, Subrat Patnaik and Shubham Kalia in Bengaluru; Additional reporting by Noor Zainab Hussain; Editing by Amy Caren Daniel, Bernard Orr and Shounak Dasgupta

Our Standards:The Thomson Reuters Trust Principles.



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