The company and three affiliates filed a voluntary Chapter 11 petition for bankruptcy court protection on Monday in a bankruptcy court in Delaware. Because the filing was a pre-packaged bankruptcy, the bridal retailer also filed with the court a plan of reorganization and disclosure statement. It expects to exit bankruptcy proceedings by Jan. 14, and has in place exit financing of between $40 million and $60 million.
In a statement filed by Joan Hilson, executive vice president and chief financial and operating officer, she said the current plan of reorganization has the company paying trade vendor claims in full. Noteholders are part of the agreed upon workout agreement that reduced the company’s debt to $343 million, upon exit from bankruptcy, from a prepetition total indebtedness of $777 million.
Tim Hynes, an analyst at Debtwire, said, “Based on projections, the $343 million is a reasonable amount of debt.” He noted that since David’s Bridal was a financial reorganization and didn’t have anything to do with restructuring its operations — the issue was the retailer’s inability to refinance its term loan — he expects the bankruptcy process should “move along fairly quickly.” Hynes also noted that the case is also somewhat rare since the retailer is also not closing any stores, another factor that will help to move the process along faster.
The largest unsecured creditor is the Wilmington Trust Co. based in Guilford, Conn., the trustee of the 7.75 percent senior note due 2020, at $270 million. The top fashion trade vendors are Ignite, New York, N.Y., $791,500, and Alex Apparel Group Inc., New York, N.Y., $733,038.
According to Hilson, adjusted earnings before interest, taxes, depreciation and amortization was $83 million for the fiscal year ended Dec. 31, 2017, and $77.7 million for the first nine months of 2018. The majority of stores have “profitable four-wall EBITDA.” Hilson said the company has “only [experienced a] model loss of market share.” The tipping point was the amount of debt, most of which was slated to mature within the next 12 months.
The retailer’s financial over-leveraging was due to debt from a leveraged buyout. A 70.6 percent stake in David’s Bridal was acquired by Clayton, Dubilier & Rice in October 2012, with Leonard Green & Partners retaining a minority interest of 24.2 percent. Leonard Green affiliates acquired the company in 2007 from Federated Department Stores. The bridal retailer became part of Federated’s portfolio after Federated acquired May Department Stores Co. May acquired David’s Bridal in 2000, and before that the bridal retailer was a publicly listed company on the New York Stock Exchange. It completed its initial public offering in 1999.
David’s Bridal employs 9,260 people, of which 2,260 are full time. It has 311 stores, including 296 locations across 49 states, 11 stores in Canada, four in the U.K. and two franchised stores in Mexico. All stores are leased, except for two stores in New Jersey and Virginia.
Hilson said revenue comes from the davidsbridal.com site and at more than 300 brick-and-mortar retail locations, alteration services at retail locations, franchising arrangements and partnership programs with other companies, as well as wedding services programs.