Iconic American clothing retailer J.Crew on Monday became the first nationwide retailer to file for bankruptcy as the coronavirus crisis ravages the retail industry.
The New York-based company — whose clothes were famously touted by Michelle Obama — is among several major retailers that have suffered while the pandemic forces stores closed and shut shoppers in their homes.
J.Crew will emerge from the restructuring with new owners — it reached a deal to turn $1.65 billion of its debt into equity for its lenders, including the investment firm Anchorage Capital Group, effectively handing them control of the company.
The chain’s lenders will also provide $400 million in financing to see it through the bankruptcy process, during which it plans to keep operating, according to a news release.
“As we look to reopen our stores as quickly and safely as possible, this comprehensive financial restructuring should enable our business and brands to thrive for years to come,” J.Crew CEO Jan Singer said in a statement.
The coronavirus crisis has forced J.Crew to shutter its nearly 500 stores, including those under its trendy, youth-focused Madewell label.
Other big retailers could soon join J.Crew in the bankruptcy courts thanks to the pandemic, which led to a record plunge in US retail sales in March. JCPenny and Neiman Marcus are also reportedly considering bankruptcy filings as their stores remain shut.
Global stock turmoil fueled by the crisis also forced J.Crew to abandon plans to turn Madewell into a publicly-traded company.
Madewell’s sales rose 14 percent in the fiscal year that ended Feb. 1 — while J.Crew sales fell 4 percent.
J.Crew started out in 1947 as a low-priced women’s clothing business called Popular Club Plan. The company was reinvented under its current name in 1983 with an upscale preppy aesthetic sported by the likes of Meghan Markle and Reese Witherspoon.
Private equity firm TPG Capital and Leonard Green & Partners took over J.Crew in 2011 in a $3 billion leveraged buyout. There were talks in 2014 about selling the company to Uniqlo parent company Fast Retailing, but the negotiations fell through.
With Post Wires
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