UPDATE: October 20, 2020: The true religion has officially left chapter 11 bankruptcy. CEO Michael Buckley said in a press release that the legal restructuring “has enabled the company to reduce operating costs and debt, and emerge as a profitable, lean operating company with a healthy balance sheet. “.
Lender and shareholder Farmstead Capital Management, along with Crystal Financial, fellow lender and owner Simon Property Group, backed the denim specialist’s reorganization, True Religion said.
- True Religion is set to emerge from bankruptcy shortly after receiving court approval for his plan reorganizing under new ownership in Chapter 11 this week.
- Under the plan, the clothing seller would hand over most of the new equity to existing lenders. A $65.8 million settlement with a group of term lenders allowed the retailer to finalize terms of the plan, according to a spokesperson for law firm Cole Schotz, which is representing True Religion in its Chapter 11 case. .
- true religion filed for bankruptcy in April after temporarily shutting down its imprint amid the COVID-19 pandemic. It currently operates 50 stores, according to court documentsdown from the 87 the retailer had when it filed.
Overview of the dive:
True Religion was among the first retailers taken to court to seek bankruptcy protection as the pandemic crisis created financial chaos for struggling retailers across the industry.
With its stores closing, the denim specialist’s revenue fell by around 80%, True Religion’s chief financial officer said at the time of the filing. In its filing, the retailer asked for a break on rent, which would become a chorus among the parade of retailers filing for Chapter 11 in the spring and summer.
Founded in 2002 by Jeff Lubell, True Religion made its first trip through bankruptcy in 2017, one of a long line of mall-owned and privately-owned apparel retailers in file for bankruptcy that year as the debt burden clashed with a rapidly changing retail market.
Its first Chapter 11 gave True Religion a chance to reduce its debt, but the problems persisted. Profits and sales began to decline in 2019 due to “product designs that weren’t appealing to True Religion’s traditional customer base,” as well as e-commerce discounts to eliminate slow-moving inventory, according to the financial director.
Over a one-year period ending February 1 – long before the pandemic spread to the United States — True Religion posted a net loss of $50 million on $259 million in revenue. The company responded with change CEOcutting costs, refocusing the product line and other measures, including an attempt to negotiate an out-of-court settlement with lenders which was unsuccessful.
Its second bankruptcy gives True Religion another chance to lighten its balance sheet, shrink its footprint and try to find solid ground in a market still largely shaped by COVID-19. That the retailer was able to reorganize in the event of bankruptcy, while others, including other apparel retailers like RTW Retailwindshave liquidated shows that key stakeholders see value in the denim maker going forward.