J.Crew RTW Spring 2017


J. Crew Group Inc. is looking for the New York State Supreme Court to give an official seal of approval to its corporate rejiggering.

The company, which in December moved some of its intellectual property into a separate subsidiary, filed suit in the court’s commercial division against Wilmington Savings Fund Society.

Wilmington Savings is the successor agent under the firm’s term loan agreement and J. Crew said the suit was “based on actions taken by an ad hoc group of term loan lenders to disrupt the company’s evaluation of opportunities to enhance its capital structure.”

The company said it is seeking a declaration from the court that its actions are in full compliance with the term loan agreement.

J. Crew said: “On December 5, 2016, the company exercised its rights under the term loan agreement to invest certain intellectual property in the company’s wholly owned unrestricted subsidiary, J. Crew Domestic Brand LLC. The purpose of this action was to provide the company flexibility in connection with its evaluation of capital structure to strengthen the position of the entire corporate enterprise. The recent investment fully complied with the company’s term loan agreement.”

The retailer said the move was permitted, but is asking the court to reaffirm the company’s position.

Mike Nicholson, president, chief operating officer and chief financial officer of J. Crew, said: “The legal actions we are taking today are in keeping with our ongoing efforts to evaluate and pursue opportunities to strengthen our balance sheet as we position J. Crew for long-term growth.”

Debt holders have been nervously watching the retailer. Bonds tied to the company recently traded at 44 cents on the dollar, up from 41 cents on the dollar at the start of the year.

J. Crew was taken private by Leonard Green and TPG Capital in a $3 billion deal in 2011 and has been struggling to both get the merchandise right in its stores and to manage its debt.

In early December, debt watchdog Moody’s Investors Service downgraded the $2.1 billion in debt tied to J. Crew — through indirect parent Chinos Intermediate Holdings A Inc. — noting that the company had a “very high leverage and an unsustainable capital structure.”

Moody’s downgraded Chinos’ corporate family credit rating two spots, to “Caa2” from “B3,” signaling the debt was “judged to be of poor standing” and “subject to very high credit risk.”

The retailer said in its statement that it has more than $400 million available in cash and under its asset-backed loan and maintained that it is financially stable and looking to position the business for long-term growth and success.

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