Oct 12, 2016
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Denim company True Religion reportedly hires debt restructuring lawyers

Oct 12, 2016

True Religion Apparel Inc, a U.S. denim company whose signature products have slowly fallen out of style, has hired law firm Kirkland & Ellis LLP to explore several debt restructuring options, according to people familiar with the matter.

The Athleisure boom has eroded True Religion's market share as denim and jeans falls out of fashion. - True Religion ©

The move represents a fall from grace for True Religion, which became a part of popular culture a decade ago as celebrities including Katie Holmes and Jessica Simpson donned its apparel. The brand was frequently cited in hip-hop songs performed by Nicki Minaj and Kanye West.

True Religion's financial struggles are due in part to consumer tastes shifting toward internet shopping and away from the brick-and-mortar shops and department stores where the company's jeans have been primarily sold.

The so-called athleisure trend, a surge in popularity of comfortable athletic-style clothing that can be worn outside the gym, has also hurt the denim maker's sales. The company is now struggling to cope with a roughly $500 million debt pile.

True Religion has been consulting with Kirkland on a range of possibilities for slashing its debt, be it through a bankruptcy filing or in negotiations with the company's lenders, the people said this week, cautioning that no decision has been taken.

The sources asked not to be identified because the deliberations are confidential. True Religion, the company's private equity owner, TowerBrook Capital Partners LP, and Kirkland declined to comment.

A $400 million term loan of True Religion was trading at approximately 27 cents on the dollar on Tuesday, according to Thomson Reuters data. Such a low quote for the loan, which was used to finance the acquisition of True Religion by TowerBrook in 2013 for $824 million, is indicative of financial distress.

True Religion faces a high risk of a default or distressed exchange, credit ratings agency Moody's Investors Service Inc warned in June, noting that in January TowerBrook bought back $22.8 million of the company's first lien term loan for $14.4 million.

Moody's said the True Religion brand had "lost some relevance" since its peak in the mid 2000s, when the jeans were seen as a status symbol.

True Religion has been working to reinvigorate the brand through digital marketing campaigns, Moody's said. The company has also collaborated with Russell Westbrook, a star player on the Oklahoma City Thunder of the National Basketball Association, for menswear.

There are also signs that the downturn the denim industry went through over the past couple of years is ending, consumer research firm NPD Group Inc said in August. In the 12 months ending June 2016, U.S. sales of men's and women's jeans grew 2 percent to nearly $13 billion, driven by a 4 percent increase in the number of pairs of women's jeans sold.

True Religion had 160 stores as of January. This spring, the company was searching for a turnaround adviser to help reverse its fortunes and had been in talks with Harry Wilson's Maeva Group LLC, Reuters reported in April.


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