The Ascena Retail Group Inc., operator of the Ann Taylor, Loft, Lane Bryant, Justice and Lou & Grey chains, has filed for Chapter 11 bankruptcy, the company disclosed today.
Ascena, yet another retail victim of COVID-19 and insurmountable debt piled up through a string of acquisitions over the years, said it entered into a restructuring agreement with over 68 percent of its secured term lenders. Prior to the coronavirus outbreak, Ascena liquidated Dressbarn and sold off the Maurices chain. The company now plans to close all its Catherines stores.
The pre-arranged financial restructuring plan is expected to reduce Ascena’s debt by about $1 billion and provide “increased financial flexibility to enable the company to continue its focus on generating profitable growth and driving value for customers and stakeholders.”
Ascena said it worked out $150 million in funding from existing lenders. With that, plus cash flow from existing operations, the company feels it has sufficient funds to meet its needs.
The company also said that it will reduce its footprint by closing a significant number of Justice stores and certain Ann Taylor, Loft, Lane Bryant and Lou & Grey stores. “This includes the exit of all stores across brands in Canada, Puerto Rico and Mexico and the closure of all Catherines stores,” the company said. The total number of stores to close depends on negotiations with landlords and bankruptcy court permission. Bankruptcy allows retailers to vacate leases without penalties.
The company filed the Chapter 11 petition in the U.S. Bankruptcy Court for the Eastern District of Virginia.
Currently, Ascena is operating with about 95 percent of its stores reopened after shutting down temporarily earlier this year due to the coronavirus.
“The meaningful progress we have made driving sustainable growth, improving our operating margins and strengthening our financial foundation has been severely disrupted by the COVID-19 pandemic. As a result, we took a strategic step forward today to protect the future of the business for all of our stakeholders,” said Carrie Teffner, interim executive chair of Ascena.
“The RSA (restructuring agreement) formalizes our lenders’ overwhelming support for a comprehensive plan to deleverage our balance sheet, right-size our operations and inject new capital into the business. With the cash generated from our ongoing operations and the new money financing commitments we received from our lenders, we expect to have sufficient liquidity to meet our operational obligations during the court-supervised process. We expect to move through this process on an expedited timeframe as our talented leadership team, established over the last year, stays focused on generating profitable growth and driving value for customers and stakeholders.”
Gary Muto, chief executive officer of Ascena, commented, “Ann Taylor, Loft, Lane Bryant, Justice and Lou & Grey have incredibly loyal customers who are at the center of everything we do. These iconic brands have significant long-term potential and we continue to deliver on their mission to provide all women and girls with fashion and inspiration to live confidently every day. This comprehensive restructuring, as well as the actions we are taking to optimize our brand portfolio and store fleet, mark a new start for our company and will allow us to expand our customer-focused strategies across her mobile, online, and store experiences.”