All you need to know about J.Crew restructured debt program

The U.S. preppy fashion label is making progress towards restructuring its debt. J. Crew has just received the green lights to get a credit agreement amendment approved, which it has been seeking to dissolve a lender lawsuit. The legal case pursues the blockage of the transfer of intellectual property to an affiliated company, after Canyon Partners sold 100 million dollars’ worth of J.Crew’s loan earlier this week.

A source close to the matter cited by Bloomberg said that the fashion retailer, which faces a total debt of 2.1 billion dollars, asked creditors to agree to an out-of-court restructuring that would extend the maturity on bonds to 2021. Once approved, this exit will give J. Crew more time to turn around its business and boost declining sales.

On June,16 J.Crew gets closer than ever to moving on with its debt restructuring

On June, 16 J.Crew Group announced they have received consents to the Term Loan Amendment announced on June 12, 2017 from a majority of the lenders under its term loan agreement, the requisite threshold for approval. The retailer has received to date consents from holders representing more than 80 percent of the Term Loan. As per information gauged by Bloomberg, in order to implement the recently announced restructuring out-of-court, J.Crew will need 95 percent of its bondholders to sign on.

The Term Loan Amendment was announced in connection with the offer to exchange any or all of the outstanding 566.5 million dollars aggregate principal amount of 7.75 percent/8.50 percent Senior PIK Toggle Notes due 2019 issued by Chinos Intermediate Holdings, A, Inc., an indirect parent company of the fashion retailer.

Next steps for the company is “to immediately stay all litigation activities regarding the Company's intellectual property transactions that occurred in December 2016. Upon the satisfaction of all conditions to the effectiveness of the Term Loan Amendment, the direction will require the Term Loan Agent to withdraw and dismiss, with prejudice, all pending litigation, including any claims that were or could have been asserted between the Company and the Term Loan Agent.”

As previously explained by the retailer, J.Crew “views these transactions as strategically important to its overall effort in positioning the company for long-term success. Addressing the nearest-term maturity removes an overhang in a challenging market environment and provides the company a clear and more confident path to execute its business plan.”

New deal gets J.Crew more time and cheaper debt to repay

The deal would help J.Crew move on to a second phase of debt restructuring and also settle a lawsuit that has been lingering over the company since December. This deal would exchange J.Crew's senior bond debt (currently standing at 566.5 million dollars and maturing in 2019), for new bonds worth less than half as much and due two years later. The group would also receive new stock recalls Reuters.

Earlier this year, in April, J. Crew advanced it wouldn't be able to pay interests on these bonds in due time in November. To make it up for that, the retailer would pay in kind.

Despite the deal going through, the company would still be forced to implement further restructuring of its debt.


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