Ascena Retail Group Inc.’s request to defer rent is getting pushback from its landlords.
The recently bankrupted company, which asked for a two-month stay on rent payments in July, has received objection from a group of property owners who lease out spaces to its chains, including Ann Taylor and Lane Bryant.
According to court documents dated Wednesday, the landlords collectively own shopping centers where Ascena operates 286 outposts. They argued that the judge should not give the retailer a deferral since nearly all of its stores have resumed business amid the coronavirus pandemic.
What’s more, they suggested that the “true ’cause'” of Ascena’s request indicates that it does not intend to pay rent and instead “be in a better position to leverage their negotiations with landlords” to seek concessions on its leases.
“There is no equity in having these debtors that have financing in place to timely meet their obligations as they come due under the leases receive authority to delay those payments simply for negotiating leverage to the detriment of landlords that are already suffering,” the property owners wrote in the filing.
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A hearing on the issue is scheduled for Aug. 26. FN has reached out to Ascena for comment.
Ascena — which also owns the Loft, Lou & Grey, Justice and Catherines brands — filed for Chapter 11 protection last month as the global health crisis took a toll on its business. Government-mandated lockdowns and restrictions on nonessential businesses forced its stores across the country to shutter for weeks, causing the company to implement furloughs, reduce base salaries and cut back on advertising expenses.
“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,” said Ascena interim executive chair Carrie Teffner at the time of the filing. “As a result, we took a strategic step forward today to protect the future of the business for all of our stakeholders.”
As part of its restructuring, the retail group plans to close all stores in Canada, Puerto Rico and Mexico, as well as all units under the Catherines banner. It also intends to sell Catherines’ intellectual property and e-commerce business to a City Chic subsidiary. In addition, it will shut down a “significant” number of Justice locations and a “select number” of Ann Taylor, Loft, Lane Bryant and Lou & Grey outposts.
Ascena managed to reach a restructuring agreement with 68% of its secured term lenders and obtained $150 million in new funds from its existing lenders. Through proceedings, it plans to eliminate about $1 billion of its roughly $12.5 billion debt load.