The Ascena Retail Group Inc., bankrupt since July 23, advanced its restructuring efforts by agreeing to sell its Justice tween girls division to Premier Brands Justice.

Ascena said it sold the intellectual property, e-commerce business and other assets of Justice to Premier Brands, which is an acquisition vehicle for IHL, a men’s, women’s and children’s apparel manufacturing and wholesale company. But Ascena will conduct an auction for Justice as required by bankruptcy law, meaning Premier Brands serves as the “stalking horse bidder.”

According to a court motion approving the sale and the auction process, Premier Brands has agreed to a base cost of $35 million for Justice assets. The asset purchase agreement, or APA, is subject to higher or otherwise better offers, among other conditions.

Decisions about the Justice retail stores will be made separate from the other assets, as part of the auction process, Ascena said. Ascena has already closed about 600 of Justice’s 800 locations.

“A sale of the Justice intellectual property, e-commerce business and other assets brings us closer to the completion of our restructuring process. All of our restructuring activities are focused on maximizing value for all of our stakeholders and positioning the Ascena brands for long-term success,” said Gary Muto, Ascena’s chief executive officer.

“With a reduced store footprint and a more focused collection of go-forward brands, we believe that Ascena will emerge from Chapter 11 better able to strategically invest in our future and generate sustainable, profitable growth. Justice remains a brand beloved by tween girls, and we look forward to a competitive auction process.”

Last month, the company signed a deal to sell the intellectual property of its Catherines large size division to FullBeauty Brands Operations LLC for $40.8 million and potential upward adjustment for certain inventory. The Catherines stores were all closed.

Ascena continues to operate its Ann Taylor, Loft, Lane Bryant and Lou & Grey brands through stores and web sites.

At the end of August, the company was operating about 1,500 stores, but it’s continuing to streamline and expects to drop down to 1,300 stores. Pre-bankruptcy, Ascena operated 2,700 stores. In addition to closing the Catherines stores, Ascena closed all of its stores across brands in Canada, Puerto Rico and Mexico and prior to the coronavirus outbreak, Ascena liquidated Dressbarn and sold off the Maurices chain.

Its restructuring plan involves reducing its debt by about $1 billion, from $1.3 billion. The hearing to consider confirmation of the plan has been scheduled for Oct. 23.

The company has also received approval from the bankruptcy court for debtor-in-possession financing, which includes a $400 million ABL facility and a $312 million term loan, which includes $150 million in new money, which converts to exit financing upon the company’s emergence from the Chapter 11 process.

Ascena’s bankruptcy stems from a series of acquisitions of retail brands over the years leading to a heap of debt. Ascena’s woes weave a tale of how management failed to execute on a vision to grow through aggressive acquisition and lead the mid-tier women’s specialty sector, which for years has been among the most troubled and competitive in retailing.

Exterior of the Anne-Taylor Loft store in Paramus, N.J.

Loft will likely remain in the Ascena portfolio. Here, Loft in Paramus, N.J., in the summer.  John Aquino/WWD

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