Francesca's store and logo seen at Levis Commons shopping center. (Photo by Stephen Zenner / SOPA Images/Sipa USA)(Sipa via AP Images)

Francesca’s, the women’s apparel and footwear retailer, has filed for bankruptcy with plans to emerge through a sale process. 

The company walked into its bankruptcy case in Delaware late Thursday with a letter of intent with investment firm TerraMar Capital, for either TerraMar or an affiliate to be its stalking horse bidder in a sale process as the case progresses, according to the retailer. The company also added that a “number of other parties” are also conducting due diligence on the sale prospect. 

In a statement, the retailer said it plans to execute a sale of its “core retail locations as well as its promising digital expansion and new brand launches.” The company, which last month said it plans to close 140 locations by Jan. 30, is entering the bankruptcy with 558 locations. As the retailer works to renegotiate rent during the bankruptcy process, it may close more stores, it said. 

Francesca’s has also entered the proceedings with an agreement from its lender Tiger Finance LLC for a $25 million debtor-in-possession loan that the court is expected to consider for customary approval at an initial hearing in the case. 

“Implementing this process allows Francesca’s to address our lease obligations and seek a new investor that can see Francesca’s into the future,” said Andrew Clarke, the retailer’s chief executive officer.

“The financing provided by Tiger will enable Francesca’s to pursue a sale process that will allow us continue to focus on our omnichannel strategies, optimize our boutique fleet, broaden our customer reach with brand extensions and drive sustainable, profitable growth,” he said. 

“We are excited by the potential partnership with TerraMar and we share their belief in the future of the business. In addition, a number of other parties are currently engaged in the due diligence process to become the owner of a new and revitalized Francesca’s,” Clarke said. 

In its bankruptcy filings, the retailer listed assets up to $50,000, and liabilities between $1 million and $10 million. Among its top creditors, the retailer listed landlords including those at Premium Outlet Partners, L.P. in Indianapolis, which it owes $573,636 and Tanger Properties Limited Partnership in Greensboro, N.C., which it owes $535,829. It also listed several product vendors including Arc Textiles Inc., which it owes $492,694; Jolie Clothing, Inc., which it owes $437,969; and Ana Accessories Corp., which it owes $381,474. The company has roughly 5,200 vendors overall that supply its products and services, it said in court.  

On Friday, the retailer also moved for the court’s permission to pay its critical vendors, in a customary first-day motion where retailers seek permission to pay vendors that they deem to be most crucial to keeping their business running during the bankruptcy proceedings. Most of the funds the retailer is seeking permission to pay its critical merchandise vendors, roughly 74 percent of it, is for products those vendors provided shortly before its bankruptcy filing.

In general, payment claims that precede a bankruptcy filing are treated as general unsecured claims that may only see partial recoveries through the bankruptcy process. But goods supplied to a company within 20 days before it files for bankruptcy production may get priority treatment as a kind of administrative expense. Administrative expenses generally refer to expenses that a bankrupt company incurs while operating during the bankruptcy, and those expenses are entitled to be repaid. 

“The continued receipt of inventory and other goods from the critical vendors is necessary to ensure that there are not any interruptions in the debtors’ business operations, and to preserve and maximize the value of the estates,” the company said in a filing. 

“Moreover, any interruption in the debtors’ inventory would adversely affect the ongoing sale process. The loss of any of these critical vendors would immediately and irreparably harm the debtors’ business,” it said. 

The retailer is expected to present this and other first-day motions for the court’s consideration at its first-day hearing, which is expected to be scheduled soon in the case.