NEW YORK, United States – Ascena Retail Group, the owner of clothing chains Ann Taylor and Lane Bryant, filed for bankruptcy protection on Thursday after the company was confused by the Covid-19 pandemic.
The filing with the U.S. Bankruptcy Court in the Eastern District of Virginia is the latest of retailers pushed over the edge by the nationwide closing of stores to fight the outbreak. Bankruptcy protection allows the company to avoid a permanent closure, reduce its loans and close weak stores to minimize costs. Based on data from Ascena’s most recent annual report, more than 50,000 jobs could be affected.
The company, which had about $ 12.5 billion in debt, entered into a restructuring support agreement with more than 68 percent of its secured lenders, it said in a statement. The pre-agreed restructuring plan is expected to help the company reduce debt by approximately $ 1 billion. In addition, Ascena will receive $ 150 million in new funds from existing lenders.
“With the money generated from our ongoing operations and the new money financing commitments we received from our lenders, we expect to have sufficient liquidity to meet our operating obligations during the court-supervised trial,” said Carrie Teffner, Ascena’s interim executive chairman in the statement. “We expect to complete this process in an accelerated time frame.”
Retailers, many of whom are already struggling with competition from online shopping, have been hit hardest by Covid-19. Lockdowns cut revenues, leaving companies like JC Penney Co., J. Crew Group Inc. and Neiman Marcus Group Inc. went bankrupt.
Chief Executive Officer Gary Muto temporarily closed approximately 2,800 stores in mid-March as a result of the outbreak. The Mahwah, New Jersey-based company began reopening in early May when authorities lifted restrictions. But foot traffic remained below normal, with retail sales dropping between 3% and 80% in the last three weeks of May, according to a June lender presentation released today.
Management expects revenues to decline 21 percent in the fiscal year ending August, with projected losses to 2021, according to the presentation.
Even before the pandemic, Ascena had financial problems of its own: sales fell and loans rose to over $ 1 billion. The retailer tried to sell two of its chains amid increasing losses and signs that creditors were losing confidence in its outlook, Bloomberg reported.
Under the restructuring plan, the company will close “a significant number” of Justice stores as well as some stores of Ann Taylor, LOFT, Lane Bryant, and Lou & Gray, the company said in the statement.
By Katherine Doherty