- Angela Gonzalez-Rodriguez |
"The steps we are taking today allow the Company to definitively address its debt and enable the management team to turn its full focus toward executing our key strategies, including our Product, Brand and Omni-channel initiatives," CEO Daniel Griesemer said in a statement.
Griesemer referred to the voluntary Chapter 11 filing the company petitioned Sunday with the U.S. Bankruptcy Court for the Eastern District of Virginia.
"We expect to move through this process quickly and emerge as a stronger organization that is better positioned in today's evolving retail landscape," continued Griesemer in a release which simply confirmed the market’s suspicions: the company was using all its weapons to avoid bigger losses.
James Mesterharm, Gymboree's chief restructuring officer, said in the court filing that the retailer was hurt by lower-cost competition from rivals Children's Place and Gap, both of which have less debt financing.
Chapter 11 to help Gymboree reduce debts by 900 million dollars
Market sources explain that the protection granted by Chapter 11 should help Gymboree reduce its debts by more than 900 million dollars. In this regard, Gymboree said it has signed a restructuring support agreement with a majority of its term loan lenders. The company said it has received 35 million dollars in new debtor-in-possession financing from the majority of its term loan lenders and up to 273.5 million dollars in additional financing from existing lenders.
In conjunction with its latest filing with the Securities and Exchange Commission, Gymboree confirmed it has secured commitments for up to 308.5 million dollars in additional financing.
Gymboree to close 375 stores
Also in the filing, Gymboree management noted that it will close about 375 stores. Breaking down its leases, the retailer said 35 percent of its 1,300 stores are leased from real estate investment trusts, or REITs, GGP and Simon Property Group.
Gymboree said it expects to operate its overall business and the "majority of its stores" as usual during its financial restructuring and has made plans to pay its vendors for all goods and services delivered on or after June 11, 2017.
A bankruptcy filing had been seen as imminent, with S&P Global lowering its corporate credit rating on the company to "D" from "CC." In fact, early signs of a potential bankruptcy were spotted back to February this year, as Gymboree descended into a spiral of heavy discounting and corporate introspective, trying to find its soul and biding on flexible and innovative retail formats.
The children's clothing retailer announced the news barely weeks after it publicized its partnership with turnaround firm AlixPartners to assist with its operations. Additionally, the San Francisco-based kidswear retailer announced Monday the departure of Chief Financial Officer Andrew North, who is leaving for personal reasons.
Photo:Gymboree Official Web