Although Ascena Retail Group Inc. said it has no plans to file for bankruptcy protection, ultimately it may have to go that route anyway.
Speculation this week indicates the women’s specialty store group could be heading for a Chapter 11 filing days after lingering chatter forced Ascena to minimize bankruptcy speak last March. And the retailer’s May 28 update said it was evaluating all options to preserve the business. Additionally, the company recently approved $5.5 million in executive retention bonus payouts last month, a move many companies are choosing to keep key executives on board for the coming post-bankruptcy journey.
The company has also been in talks with creditors over the past month, trying to come up with a plan that could help wipe out some of Ascena’s assets. debt in exchange for shares in a newly reorganized company. Now, in the very final stages of those talks, it’s believed the retailer could file once it finalizes a deal with creditors. Bloomberg reported that the lenders, including Eaton Vance Corp., would take control of the company in a deal that could eliminate $700 million from its $1.1 billion loan. He also said a filing could cause 1,200 stores to close. Ascena executives could not be reached for comment.
All non-essential retailers have temporarily closed their stores as state and local governments imposed shelter-in-place orders to stem the coronavirus outbreak. Starting in May, the company cautiously reopened its stores. On May 28, the company said the pandemic “has significantly disrupted its business” given that retail stores generate the majority of its revenue and cash flow.
But if the struggling retailer blames COVID-19 for the latest twist in its fortunes, that wouldn’t be entirely accurate. The company has been in trouble for some time, which eventually led to it selling a majority stake in its Mauritius discount clothing operation last year. Subsequently, it was decided to close its value chain barn. As for Other brands in its portfolio, Ascena had attempted to sell its full-size nameplate, including Lane Bryant and Catherine, but could not find buyers. The company’s best-known brands are its Ann taylor and loft companies, which it acquired from Anne Taylor Corp. in 2015 as part of a $2.2 billion deal.