When the Fitch ratings agency announced that a number of retailers were sitting on the brink of insolvency less than a month ago, it didn’t take long for one of them on that list to initiate bankruptcy proceedings for their business. And on May 16 Rue 21 became the newest company to file for protection from creditors.
In its bankruptcy petition, the company which retained Kirkland & Ellis as legal advisor, Rothschild as financial advisor, and Berkeley Research as its restructuring advisor, listed both assets and liabilities in the range of $1 to $10 billion.
The restructuring process, during which the company will operate as normal, will lead to company’s “transformation into a more focused and highly performing retailer” the company announced in a press release, and added that as part of its restructuring process, it had “entered into a Restructuring Support Agreement (RSA) with certain of its stakeholders that confirms the support of the Debtors’ key constituents for the Debtors’ restructuring process and contemplates, among other things, an emergence from chapter 11 proceedings in the fall of 2017 with a significantly deleveraged balance sheet. In particular, lenders holding 96.8% of the Company’s secured term loan, bondholders representing 60.2% of the Company’s issued and outstanding unsecured notes, and the Company’s majority shareholder each executed the Restructuring Support Agreement.”
The Company has also reached agreements, subject to the approval of the Court, to obtain up to $125 million in ABL debtor-in-possession financing from its existing ABL lenders and up to $50 million in new money term loan debtor-in-possession financing from a subset of its existing term loan lenders. This financing is intended to provide the Company with the liquidity necessary to support its ongoing business operations during the financial restructuring process. – Zerohedge
Rue 21 joins Payless Shoes in having officially filed for bankruptcy in 2017, with the companies below all residing on the precipice of following suit.
Sears Holdings Corp (roughly $2.5 billion);
99 Cents Only Stores LLC;
Charming Charlie LLC;
Nine West Holdings Inc.;
NYDJ Apparel LLC;
True Religion Apparel Inc.
With most American consumers completely tapped out due to credit card debt, limited savings, and rising healthcare costs, the possibility of these and more even more retailers having to seek bankruptcy protection will only escalate in the coming months and years.
Kenneth Schortgen Jr is a writer for The Daily Economist, Secretsofthefed.com, Roguemoney.net, and Viral Liberty, and hosts the popular youtube podcast on Mondays, Wednesdays and Fridays. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.