J.Crew Group Inc. could emerge from bankruptcy in a matter of days.
The New York-based chain announced on Tuesday that it expects to exit from Chapter 11 in early September after the United States Bankruptcy Court for the Eastern District of Virginia approved the specialty retailer’s second amended restructuring plan. The move cleared the way for J.Crew’s $1.6 billion debt-for-equity swap, as well as provided $400 million in an asset-based lending facility and more than $400 million in new term loans.
“The confirmation of our plan of reorganization is another significant milestone in our path to transforming our business to drive long-term, sustainable growth for J.Crew and further advance Madewell’s growth momentum,” CEO Jan Singer said in a statement. “As we move towards emergence, we look forward to continuing to position J.Crew and Madewell for long-term success.”
According to the company, the plan received “widespread support” among its stakeholders. Court documents showed that several parties — including the committee representing the brand’s unsecured creditors — had withdrawn their objections to the arrangement over the past few days.
In early May, J.Crew became the first major American retailer to go bankrupt amid the coronavirus pandemic. At the time, it said it would use Chapter 11 to restructure its debt, as well as work to reposition its J.Crew and Madewell labels for the long term. (It currently operates 170 J.Crew stores, 141 Madewell outposts and 170 J.Crew Factory locations.)
Two weeks ago, the retailer announced that it had reached an agreement with its landlords to improve lease terms on its brick-and-mortar portfolio of J.Crew and Madewell units. In a statement then, it said it expects to achieve cash savings this year of roughly $70 million, which includes the benefit of one-time waivers and deferrals, as well as $60 million next year, assuming sales are in line with projections.
Although the pandemic precipitated its demise, J.Crew has floundered for several years with disappointing financial results. At the end of the most recent fiscal year, the company had just $27.2 million left in cash, versus a debt load of about $1.7 billion. In its fourth-quarter earnings report, its flagship brand posted a sales decrease of 2% to $516.8 million, with comps that improved 1%. Madewell outperformed the business as a whole, logging a revenue increase of 13% to $178.1 million, along with a 9% rise in comps.