Ascena Retail Group, inc. has entered into a restructuring support agreement (RSA) with over 68 percent of its secured term lenders. The company said in a statement that the plan is expected to reduce Ascena’s debt by approximately 1 billion dollars and provide increased financial flexibility to enable the company to continue its focus on generating profitable growth. The company has filed voluntary Chapter 11 petitions in the United States Bankruptcy Court for the Eastern District of Virginia.
“The meaningful progress we have made driving sustainable growth, improving our operating margins and strengthening our financial foundation has been severely disrupted by the Covid-19 pandemic. As a result, we took a strategic step forward today to protect the future of the business for all of our stakeholders,” said Carrie Teffner, Interim Executive Chair of Ascena, adding, “With the cash generated from our ongoing operations and the new money financing commitments we received from our lenders, we expect to have sufficient liquidity to meet our operational obligations during the court-supervised process.”
Ascena to exit certain markets, close stores as part of restructuring
As part of the plan, the company added that it will optimize its brand portfolio and strategically reduce its footprint with the closing of a significant 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 has entered into purchase agreement with City Chic Collective Limited (City Chic) to sell the Catherines intellectual property assets and to transition its e-commerce business to a subsidiary of City Chic.
The company will continue to operate its Ann Taylor, Loft, Lane Bryant, Justice and Lou & Grey brands through a reduced number of retail stores and online. Ascena further said that the optimization of brand portfolio and store fleet will allow the company to stabilize its financial position in the wake of the Covid-19 pandemic and move forward as a strong, profitable business.
Commenting on the restructuring, Gary Muto, Chief Executive Officer of Ascena said: “This comprehensive restructuring, as well as the actions we are taking to optimize our brand portfolio and store fleet, mark a new start for our company and will allow us to expand our customer-focused strategies across her mobile, online, and store experiences.”
Ascena secures 150 million dollars in new term loan
Ascena has received commitments for 150 million dollars in a new money term loan from its existing lenders. The company said that 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.
Throughout the restructuring process, the company’s brands, including Ann Taylor, Loft, Lane Bryant, Justice and Lou & Grey, will continue to serve the customers. Currently, the company is operating with approximately 95 percent of its store base reopened.