Bankrupt denim retailer True Religion Apparel Inc. won preliminary court approval of its reorganization plan that hands a bulk of equity to term loan lenders and keeps more than 50 stores open for business.
Under a settlement reached over the weekend that resolved plan objections, a group holding term loans of more than $65 million will accept 88% of the reorganized company equity, lower than the 95% originally suggested, Justin R. Alberto of Cole Schotz P.C., said at a virtual hearing Monday held by the U.S. Bankruptcy Court for the District of Delaware.
The maximum equity available to management under an incentive plan would be cut from 17.5% to 16.38%.
Judge Christopher S. Sontchi said he expects to sign a plan confirmation order later Monday or early Tuesday after reviewing the revised plan and settlement terms.
Unsecured creditors should recover all of their $45 million to $50 million in claims, according to plan disclosures.
The case is likely the first successful retail reorganization in Sontchi’s court since the start of the Covid-19 pandemic, the judge said. Many retailers’ bankruptcies have resulted in liquidation.
True Religion’s April 13 filing started its second trip through Chapter 11. The company, which also sells its brand in major department stores, previously filed for bankruptcy in 2017.
The case is In re True Religion Apparel, Inc., Bankr. D. Del., No. 20-10941, hearing 10/5/20.
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