Ascena receives court approval for reorganization plan

By

Robin Driver

Published
Sep 22, 2020

Having filed for Chapter 11 bankruptcy in July, Ascena Retail Group, Inc., the Mahwah, New Jersey-based owner of Ann Taylor and Lane Bryant, has received approval from the United States Bankruptcy Court for the Eastern District of Virginia for its reorganization plan, which must now be approved by the company’s creditors.
 

The plan, which features an amended restructuring support agreement and is expected to reduce the retailer’s $1.3 billion debt by approximately $1 billion, has the support of around 95% of its secured term lenders.
 
The hearing in which confirmation of the plan will be considered is currently scheduled to begin on October 23.

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Ascena has also received court approval for its debtor-in-possession (DIP) financing, which includes a $400 million ABL facility and a term loan of approximately $312 million. The loan includes $150 million in new money, which will convert to exit financing upon the company’s emergence from Chapter 11.
 
According to the company, upon final approval of its plan of reorganization, it will be on track to emerge from bankruptcy with “a strong balance sheet and operating structure.”
 
“We are extremely pleased to have reached such significant milestones in our court-supervised restructuring process,” commented Ascena CEO Gary Muto in a release. “The approval of the Disclosure Statement and our financing commitments combined with the overwhelming support received from our lenders and the early agreement reached with the unsecured creditors committee regarding our proposed debt restructuring represent noteworthy progress toward emerging from Chapter 11 and positioning Ascena for long-term success.”
 
Muto also highlighted that the company is concluding its store closure plans across its brands, a process which will see the retailer’s overall footprint reduce to around 1,300 locations.
 
Furthermore, Ascena is in ongoing rent discussions with its landlords concerning the stores it is maintaining and has already exited and consolidated its corporate offices as part of its corporate expense reduction plan.
 
“Collectively, we believe these actions will enable us to strategically invest in the business and generate sustainable, profitable growth once we emerge from the Chapter 11 process,” Muto added.
 
The company also highlighted that the intellectual property assets of its Catherines brand is being acquired by FullBeauty Brands Operations, LLC, as part of the bankruptcy process. The transaction, which is expected to close in the coming weeks and is subject to court approval and other closing conditions, includes the provision for a transition services agreement, designed to ensure a seamless transition of the brand’s e-commerce business.
 
Ascena accumulated debt over the years due to an aggressive acquisitions strategy that saw the company purchase a series of brands which then failed to perform as expected. In February, as part of its efforts to get its finances back on track, the company completed the wind-down of Dressbarn, having already sold its Maurices brand to an affiliate of OpCapita LLP for $300 million in May 2019.