Clothing apparel retailer J.Crew, saddled with a heavy debt burden, may declare bankruptcy as early as this weekend.
Anonymous sources have told CNBC that J.Crew is preparing to file for bankruptcy and secure $400 million in financing. No plans have yet been finalized, and the timing of the bankruptcy could be delayed.
J Crew’s sales are under pressure as it faces criticism for being out of touch with customers. The retailer’s chief designer Jenna Lyons and former CEO Mickey Drexler have both left the company.
Why It Matters
The COVID-19 pandemic exacerbated J.Crews’s problems, as it was forced to close its stores, reported CNBC.
The retailer operates 182 J.Crew stores, along with 140 Madewell stores, aimed at younger shoppers. J.Crew had hoped to spinoff Madewell in an IPO, which would have helped reduce its debt burden, but faced resistance from its creditors.
The privately held J.Crew is owned by TPG Capital and Leonard Green & Partners and had nearly $2.5 billion in sales for the year ended February 1. The retailer has close to $93 million in total liquidity as of February, and debt maturities are due 2021.
The coronavirus pandemic has hit retailers hard. J.C. Penney Company Inc. JCP is in the process of declaring bankruptcy, so is Ares Management Corp. ARES owned Neiman Marcus. Meanwhile, Macy’s Inc. M and Nordstorm Inc.JWN are borrowing against real estate to remain afloat.
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