Fashion firm J Crew has filed for bankruptcy protection, making it the first big US retailer to do so amidst the COVID-19 pandemic.
The retailer announced that its parent company, Chinos Holdings, had filed for Chapter 11 protection in federal bankruptcy court for the Eastern District of Virginia. It is the first major retailer to fall during the coronavirus pandemic, but given the economic situation in the United States, J Crew probably won’t be the last.
Under the terms of the Transaction Support Agreement (“TSA”), the Company’s lenders will convert approximately $1.65 billion of the Company’s debt into equity. They are also providing about $400m of fresh financing to keep J Crew’s operations afloat.
“This agreement with our lenders represents a critical milestone in the ongoing process to transform our business with the goal of driving long-term, sustainable growth for J.Crew and further enhancing Madewell’s growth momentum,” said Jan Singer, Chief Executive Officer, J.Crew Group in the statement. “Throughout this process, we will continue to provide our customers with the exceptional merchandise and service they expect from us, and we will continue all day-to-day operations, albeit under these extraordinary COVID-19-related circumstances. 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.”
The Company has filed a series of customary “first day” motions with the Bankruptcy Court seeking to maintain its operations during the restructuring process to help facilitate a smooth transition into Chapter 11. Its 500 stores have been closed by the pandemic and some will not reopen.