These Retailers Might Go Bankrupt Soon
The unprecedented coronavirus pandemic has created a challenging environment for retailers across the board.
For several weeks, production facilities, offices and storefronts around the country shut down in an effort to curb the spread of COVID-19. While the writing has been on the wall for a number of nationwide chains for some time, other major players have been forced to face a new reality as the COVID-19 outbreak keeps consumers indoors and continues to impact nonessential businesses.
Many sought to maintain their cash flow by drawing down hundreds of millions on their revolving lines of credit, furloughing associates and cutting back on executive compensation. Some have also skipped out on rent payments, impacting their commercial landlords who need to meet their own mortgage terms.
As local and state governments give the green light to resume business, there is a light at the end of the tunnel. However, not all retailers are expected to make it post-pandemic. Here, FN rounds up the fashion and footwear companies that could file for bankruptcy in the coming weeks.
J.Jill
J.Jill could file for bankruptcy in just a matter of days. On Sept. 1, the beleaguered womenswear chain announced that it has sought permission from nearly all of its lenders on a deal that would free it from its financial covenants, extend its debt maturities and provide its business with additional liquidity to continue operations amid the coronavirus pandemic.
If it’s unable to get approval from the lenders who hold 95% of its term loans by Sept. 11, J.Jill plans to reorganize through Chapter 11 protection. A bankruptcy filing, the company wrote in a statement, would include an agreement with lenders to obtain at least $75 million in debtor-in-possession financing that will convert to a term loan that matures in five years.
“J.Jill has been buoyed by a strong direct business and a loyal customer base, and the transaction proposed in this agreement will enable our company to emerge from this challenging stretch in a position of strength,” interim CEO Jim Scully said in a statement on Sept. 1. “I am grateful for the confidence and support of many of our lenders and shareholders as we work together to advance the best interests of our employees, vendors and customers and position our company for long-term success.”
Francesca’s
In mid-June, Francesca’s doubled down on its warning of a potential bankruptcy. A filing with the Securities and Exchange Commission indicated that the shutdown of the apparel and accessories chain’s more than 700 boutiques from late March through the end of April had led to significant declines in its comparable sales, net revenues and gross profits. It expressed a need to obtain additional financing to keep its business up and running or enter into Chapter 11 protection.
Two weeks later, the company reported a 50% plunge in revenues to $43.8 million in the three months ended May 2. However, it forecasted comps for the second quarter, which wraps up on Aug. 1, to take a much lighter hit: Sales are expected in the range of $67 million to $71 million, assuming a comparable sales decrease of 16% to 11%. (Its Q2 2020 report will be released on Sept. 15.)
“Sales of reopened boutiques are trending within our expectations, with higher conversion largely offsetting lower traffic trends,” president and CEO Andrew Clarke explained. “With an increased focus on boutique promotions, as part of our phased reopening plans, we have cleared through the majority of our aged product, which we believe will place us in a better inventory position heading into the fall season.”
CBL Properties
Although not a retailer, CBL & Associates Properties Inc. owns 108 shopping centers across the country. In mid-August, the mall giant announced that it had entered into a restructuring support agreement with its lenders that would erase about $900 million of debt and at least $600 million other financial obligations. According to a filing with the Securities and Exchange Commission, the terms of the deal provide for a “comprehensive restructuring” of its balance sheet through an in-court process Chapter 11 process expected to begin by Oct. 1.
With the new agreement, the Chattanooga, Tenn.-based company — which plans to continue all day-to-day operations as usual — aims to build a “significantly stronger” balance sheet by reducing total debt, extending debt maturities and improving liquidity “while minimizing operational disruptions.” Ultimately, it intends to eliminate approximately $1.4 billion of its unsecured notes — in exchange for $500 million in new senior secured notes due June 2028, $50 million in cash and roughly 90% of the new common equity to holders of the unsecured notes.
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