Teen retailer Rue21 filed for Chapter 11 bankruptcy Monday, joining a growing list of struggling retailers that have turned to the courts for aid in exiting store leases and lightening their debt loads.
The Pittsburgh-based company, with 1,179 stores in 48 states, estimated assets and liabilities to each be between $1 billion and $10 billion.
Wells Fargo is listed in the company’s bankruptcy petition as the largest unsecured creditor with a claim of $239.2 million in senior unsecured notes that would have come due in 2021.
“These actions are being undertaken with the goal of strengthening the company’s balance sheet, achieving a more efficient cost structure and concentrating resources on a tighter retail footprint in order to pave the best path forward for Rue21,” chief executive Melanie Cox said in a statement. “Even in a challenging environment, we are fortunate that Rue21 has highly relevant brands, an enthusiastic and loyal customer base and hundreds of highly performing stores.”
The company said it struck a deal with lenders for $125 million in debtor-in-possession financing, along with a term loan of as much as $50 million.
“The agreement with our lenders represents their confidence in Rue21’s future success even at a time of significant retail industry change,” Cox’s statement said. “Looking ahead, I am confident that the outcome of this process will be a stronger and more sustainable Rue21 for our customers, vendors and business partners.”
The retailer’s bankruptcy filing had largely been expected. Fitch Ratings in April listed Rue21 among several retailers at risk of default, placing it in the company of Gymboree and Sears Holding Corp. Adding to the concern was an extension on an interest payment due in April for Rue21. The retailer last month began closing some 400 underperforming doors and said with its announcement of the bankruptcy filing that it “may evaluate additional store closings.”
This isn’t the first time the company’s sought to restructure in court. It filed for Chapter 11 in 2002. It later went on to file for a $125 million initial public offering in 2009. Private equity firm Apax Partners paid $1.1 billion for the company in 2013 in a deal that took the chain private.
Rue21 said it expects its bankruptcy restructuring to be completed by the fall of this year.
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