Dec 9 U.S. apparel retailer J. Crew Group Inc is
taking steps to negotiate with its creditors about cutting the
value of its approximately $2 billion debt load, as its
struggles with falling sales, people familiar with the matter
said on Friday.
A debt restructuring would underscore the challenges the
company has faced since it was acquired by private equity firms
TPG Capital LP and Leonard Green & Partners LP in a $3 billion
leveraged buyout in 2011. J. Crew has struggled as many shoppers
have shunned malls and turned to internet shopping.
The company is exploring ways to take advantage of the low
trading price of some of its debt, one of the people said.
As part of its preparations for negotiating with its
creditors, J. Crew is planning to move the rights to its iconic
brand into a separate subsidiary, the people said.
This move would give J. Crew a number of options to cut down
its debt, including raising new financing to buy back its loans
and bonds at a discount, or offering creditors the chance to
swap into the new debt holdings.
After one of the company's banks told loan holders about the
brand move, prices on its loans fell to as low as about 50 cents
on the dollar Friday morning from around 64 cents on the dollar,
the people said.
The company's bonds were trading at 36 cents on the dollar,
according to Thomson Reuters data.
The sources asked not to be identified because the
negotiations are confidential. J. Crew, TPG and Leonard Green
declined to comment.
Other retailers have considered similar moves to separate
their brands from their brick-and-mortar footprints. Teen
retailer American Apparel LLC, for example, filed for bankruptcy
last month with a deal in place to sell its intellectual
property. It is still looking for a buyer for its stores.
But moving assets can be contentious. U.S. radio station
owner iHeartMedia Inc came under fire from a group of
senior creditors when it moved shares of affiliate Clear Channel
Outdoor Holdings Inc to a subsidiary ahead of a
potential debt restructuring. A Texas judge ultimately said that
the move was permissible.
J. Crew faces $500 million in maturities in bonds in 2019.
Reuters reported last month that J. Crew was also carving out
its successful Madewell brand. That brand is not
expected to move to the new subsidiary, the people said.
Debtwire reported earlier on Friday that J. Crew would
transfer its intellectual property to a Cayman subsidiary.
(Reporting by Kristen Haunns and Jessica DiNapoli in New York;
Editing by Bernard Orr)