After months of uncertainty surrounding future of its business, Francesca’s Holdings Corp. has filed for bankruptcy protection with plans to sell the company to an investment firm.
On Thursday, Francesca’s, along with its subsidiaries, voluntarily filed for Chapter 11 relief in the United States Bankruptcy Court for the District of Delaware.
Francesca’s, which was wading through business challenges well before the pandemic took hold in the U.S., said it intends to use Chapter 11 proceedings to implement a sale process focused on the company’s core retail locations as well as its “promising” digital expansion and new brand launches. The company, which has been evaluating strategic alternatives since last year, said its board of directors unanimously agreed that pursuing a sale of the business is a “necessary step forward” for the business. It has already entered into a letter of intent, related to such a sale, with TerraMar Capital LLC, an investment firm that provides debt and equity capital to middle-market businesses. The parties have agreed that TerraMar or an affiliate would become the stalking horse bidder for the Francesca’s bankruptcy auction and sale process. (The letter of intent is subject to customary conditions.)
Francesca’s has secured $25 million in debtor-in-possession financing from existing lender Tiger Finance, LLC. The retailer expects the new facility, which is subject to court approval, to allow it to continue to operate and meet its financial obligations, including “timely” payment of employee wages and benefits, continued provision of customer orders and shipments, and payment of other obligations during the Chapter 11 cases
“Implementing this process allows Francesca’s to address our lease obligations and seek a new investor that can see Francesca’s into the future,” said CEO Andrew Clarke. “We are excited by the potential partnership with TerraMar and we share their belief in the future of the business. In addition, a number of other parties are currently engaged in the due diligence process to become the owner of a new and revitalized Francesca’s.”
The Houston-based retail chain previously announced plans to close 140 boutiques and said it will attempt to renegotiate a number of leases during the Chapter 11 process. It further indicated that it may close additional boutiques. As of today, 558 Francesca’s stores are open for business.
“We are confident that we will emerge from this process as a stronger company poised to drive growth by exploring new brand avenues, expanding our e-commerce channels, and providing our customers with the latest fashion options and treasure hunt experiences they know and love us for,” said Clarke.