By  on June 12, 2017

While there was no surprise when Gymboree on Sunday finally filed its Chapter 11 petition for bankruptcy court protection, Fitch Ratings on Monday said the company is expected to emerge as a smaller firm.

The ratings agency based that conclusion on Gymboree’s continuing support of its financial sponsor, Bain Capital. The children’s retailer has been operating with significant leverage since Bain’s 2010 leveraged buyout transaction for $1.8 billion. The company has had an unsustainable capital structure since the buyout because of negative same-store sales trends and decreasing cash flow.

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