J.Crew has become the first major US retailer to officially file for bankruptcy protection amid the global lockdown.
As per the terms of the new filing agreement, the fashion retailer’s main creditors will take control of the group in exchange for cancelling debts of $1.65bn (£1.3bn), converting them into equity.
Creditors of the group include Anchorage Capital Group, GSO Capital Partners, and Davidson Kempner Capital Management, all of which hold large amounts of the group’s debt. Control of the J.Crew Group will officially pass to them.
To facilitate the proposed restructuring, the parent company of J.Crew Group, Chinos Holdings, Inc. has had to file voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Eastern District of Virginia.
The fashion retailer, which trades from several sites across London, has also secured a financing facility of $400m (£321m) from its lenders to keep its operations running amid the pandemic.
The group’s 500 stores, and branches in Canada and the UK, have all ceased trading in light of the ongoing coronavirus crisis. It is not clear how many stores will remain closed after the global lockdown.
As part of the new agreement, fashion retailer Madewell will remain part of J.Crew Group, with Libby Wadle continuing her role as CEO of Madewell.
In the latest statement from the retailer, J. Crew said that the new agreement with lenders will “restructure its debt and deleverage its balance sheet, positioning J.Crew and Madewell for long-term success”.
Jan Singer, CEO of J.Crew group, said: “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.
“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.”
She added: “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.”
Kevin Ulrich, CEO of Anchorage Capital Group, added: “J.Crew and Madewell are two classic American brands with deeply loyal customers. We look forward to supporting Jan, Libby and the management team to recognize their full potential.”
“The significant deleveraging contemplated by this agreement, coupled with J.Crew Group’s strategy to strengthen its robust e-commerce platform to drive continued growth in its direct-to-consumer segment, will position the company for future success.”