The court filing on Thursday is the latest among U.S. retailers that have been pushed over the edge by shutdowns tied to the outbreak. The Chapter 11 action allows Ascena to avoid a permanent shutdown, cut its borrowings and close weak stores to minimize costs.
Ascena has about 40,000 employees, according to
Ultimately, Ascena expects to cut its 2,800 stores down to just 1,200, and current shareholders will be wiped out, according to court papers filed in U.S. Bankruptcy Court in the Eastern District of Virginia.
The company listed about $12.5 billion of liabilities, including $1.6 billion of funded debt. More than two-thirds of its secured term lenders support its restructuring plan, and they’ll wind up owning most of the new equity, Ascena said in a statement and court papers.
Almost $1 billion in debt will be erased, and Ascena will get $150 million in fresh funds from existing lenders.
“Even closing hundreds of stores was not enough to rebalance supply and demand -- ASNA was continually behind the curve,” Johnson said, referring to Ascena by its stock ticker. “To exit the thousands of leases it was burdened with after the decade-long buying binge, Chapter 11 was inevitable, only a matter of when, not whether.”
Ascena had been exploring rescue options for months, according to a court declaration by
Court records show the new owners will include Bain Capital and Monarch Alternative Capital, which each get to appoint a director, while a consortium also including those firms, Eaton Vance Management and Lion Point Capital will choose another.
As for operations, the company will wind down the brick-and-mortar stores of Lou & Grey, which will operate within the Loft locations, and the Justice brand will be primarily online.
Ascena has already lined up a suitor for what will remain of Catherines, one of its plus-size brands. Australia’s
Retailers, many already struggling with competition from online shopping, have been among the hardest hit by Covid-19. Lockdowns drained revenue, helping to tip companies including
Chief Executive Officer
Management forecasts revenue will fall 21% in the financial year ending August, with more losses in the months ahead.
Even before the pandemic, Ascena was having financial troubles of its own making, with sales sliding and borrowings that ballooned to more than $1 billion. The retailer was trying to
The case is Ascena Retail Group,
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