J. Crew files for chapter 11 bankruptcy as Coronavirus closes retail stores
- J. Crew files for chapter 11 bankruptcy in a Virginia federal court due to COVID-19.
- The specialty retailer will give up control to creditors for settling its £1.33 billion debt.
- The company's plans of Madewell IPO also failed due to the ongoing health emergency.
As the Coronavirus pushed global retailers into temporary closures, many of them have been tipped over the brink. In recent news, J. Crew Group Inc. said on Monday that it has filed for bankruptcy protection. Lenders are now expected to take over control of the retailer.
The American specialty retailer approached a Virginia federal court to file for bankruptcy. As per the agreement, the company will give up ownership to creditors in exchange for settling its debt that amounts to roughly £1.33 billion. J. Crew is the 1st among the retail giants to have failed due to the ongoing health crisis.
J. Crew’s plans of Madewell IPO fails due to COVID-19
Copy link to sectionSince J. Crew’s senior debt is dominated by GSO Capital Partners, Anchorage Capital Group, and Davidson Kempner Capital Management, the firms are the first in line to take over control of the New York-based chain.
According to the company, the aforementioned firms have also pledged to support its Chapter 11 bankruptcy proceedings with new financing worth £322 million. On top of cancelling debt, J. Crew is also considering permanently closing an unannounced number of its stores.
COVID-19 pushed the retailer into shutting down 500 of its J. Crew and Madewell stores as well as its factories. J. Crew also failed to implement its plan of Madewell IPO (Initial Public Offering) due to the outbreak. Originally, the IPO was expected to help minimize J. Crew’s debt.
Madewell Inc., the company added, will remain a subsidiary of J. Crew. The brand will continue to operate under its current CEO Libby Wadle.
In 2011, TPG Capital and Leonard Green & Partners took J. Crew private in a leveraged buyout of around £2.4 billion. Their investments, as per the sources, are now likely to wipe out.
J. Crew also avoided bankruptcy in 2017
Copy link to sectionThe retailer’s financial struggles started way before the Coronavirus outbreak. J.Crew had also signed an agreement with creditors in 2017 that extended the deadlines on obligations and contracted its total debt to protect it from bankruptcy.
The company also took a financial hit due to the strategic misstep of increasing prices that contracted its customer base. In 2014, Japan’s Fast Retailing Co. tried buying J. Crew but the agreement later fell apart.
In its Chapter 11 bankruptcy filing, J. Crew valued its assets and liabilities combined at £800 million to £8 billion.
