Ascena Retail Group, and certain of its subsidiaries entered into a restructuring support agreement with more than 68% of its secured term lenders.
Ascena received commitments for $150 million in a new money term loan from its existing lenders. Following court approval, this financing, combined with cash on hand and cash flow generated by the company’s ongoing operations, is expected to be sufficient to meet Ascena’s operational and restructuring needs. The new money term loan will be available during the pendency of the proceedings and will remain in place post emergence from Chapter 11.
The RSA contemplates agreed-upon terms for a pre-arranged financial restructuring plan that is expected to reduce Ascena’s debt by approximately $1 billion and provide increased financial flexibility to enable the company to continue its focus on generating profitable growth and driving value for customers and stakeholders. To implement the terms of the RSA, the company filed voluntary Chapter 11 petitions in the United States Bankruptcy Court for the Eastern District of Virginia.
As part of the balance sheet restructuring contemplated by the RSA, the company will close a number of Justice stores and a select number of Ann Taylor, LOFT, Lane Bryant and Lou & Grey stores. This includes the exit of all stores across brands in Canada, Puerto Rico and Mexico and the closure of all Catherines stores.
In addition, Ascena entered into an asset purchase agreement with City Chic Collective Limited to sell the Catherines intellectual property assets and to transition its e-commerce business to a subsidiary of City Chic. The company intends to conduct the sale process pursuant to Section 363 of the Bankruptcy Code. Accordingly, City Chic will serve as the stalking horse bidder in a court-supervised auction process and the purchase agreement is subject to higher and better offers, among other conditions.
Ascena will continue to operate its Ann Taylor, LOFT, Lane Bryant, Justice and Lou & Grey brands through a reduced number of retail stores and online. The final number of store closings will be determined based on the ability of Ascena and its landlords to reach agreements on sustainable lease structures.
Ascena filed various customary motions with the court seeking several types of relief to allow it to meet necessary obligations and fulfill its duties during the restructuring process, including authority to continue payment of employee wages and benefits, honor certain customer and vendor commitments and otherwise manage its day-to-day operations as usual.
