Aéropostale has joined the bankruptcy brigade.
The mall-based teen specialty retailer on Wednesday filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of New York.
The company, which has struggled for several quarters to stabilize margins, said its initial store closure list consists of 113 U.S. locations, as well as all 41 stores in Canada. Store closing sales are scheduled to begin in the United States this coming weekend (May 7-8) and in Canada during the workweek that starts next Monday (May 9).
In a release, Aéropostale said it will use the Chapter 11 process to “optimize its store footprint, access additional tools to shed or renegotiate burdensome contracts, resolve its ongoing disputes with Sycamore Partners and achieve long-term financial stability.”
Private equity firm Sycamore Partners bought a stake in Aéropostale in 2013 and later helped the embattled retailer with a $150 million loan in 2014 before things turned sour.
Watch on FN
Aéropostale said it intends to emerge from the Chapter 11 process within the next six months as a standalone enterprise with a smaller store base, increased operating efficiencies and reduced SG&A expenses. The company said it is also forging ahead with its previously announced sale process to “confirm that it is maximizing the value of its assets and achieving the best possible outcome for stakeholders.”
Any potential sale would be expected to be completed within the next six months.
In its bankruptcy filing, the retailer lists the value of its assets as between $100 million and $500 million; while its liabilities are also estimated at between $100 million and $500 million.
“While initiatives such as the implementation of our two-chain factory and mall strategy and our merchandise repositioning have started to gain traction, the ripple effects of an ongoing dispute with our second-largest supplier put substantial strain on our liquidity while also preventing us from realizing the full benefits of our turnaround plans,” said Aéropostale CEO Julian Geiger. “As a result, we have chosen to take more decisive and aggressive action to create a leaner, more efficient business that is well-positioned to compete and succeed in today’s retail environment.”
Aéropostale has also secured a commitment for $160 million in debtor-in-possession financing from Crystal Financial LLC to help it meet its financial obligations.