J.Jill Inc. could file for bankruptcy in just 10 days.
The struggling womenswear chain announced today that it has sought permission from nearly all of its lenders on a deal that would free it from its financial covenants, extend its debt maturities and provide its business with additional liquidity to continue operations amid the coronavirus pandemic.
If it’s unable to get approval from the lenders who hold 95% of its term loans by Sept. 11, J.Jill plans to reorganize through Chapter 11 protection. A bankruptcy filing, the company wrote in a statement, would include an agreement with lenders to obtain at least $75 million in debtor-in-possession financing that will convert to a term loan that matures in five years.
“J.Jill has been buoyed by a strong direct business and a loyal customer base, and the transaction proposed in this agreement will enable our company to emerge from this challenging stretch in a position of strength,” interim CEO Jim Scully said in a statement. “I am grateful for the confidence and support of many of our lenders and shareholders as we work together to advance the best interests of our employees, vendors and customers and position our company for long-term success.”
J.Jill shared that it was able to strike a deal with lenders that hold more than 70% of its loans to defer certain debt payments to 2024, waive all existing non-compliance with the terms of its credit facilities and grant it a financial covenant holiday until the fourth quarter of 2021. It has also been infused with $15 million of new cash in the form of a junior term loan.
Over the past several months, the Quincy, Mass.-based retailer has been teetering on the brink of insolvency as its forbearance period has been extended multiple times by lenders. To reduce expenses, it has previously drawn down $33 million under its revolving credit facility, as well as furloughed store associates, cut back on the base salaries of its executive officers and foregone its board of directors’ fees. It has also revealed plans to permanently shutter 11 locations this year — most of which are expected to close in the second quarter — for a total of 275 remaining stores by the end of fiscal 2020.
If it goes bankrupt, J.Jill said today that it expects the process to be a “swift” one, in which all vendor claims would be paid in full and from which it would “emerge with a strong and healthy balance sheet.”