Clothing apparel company J.Crew filed for bankruptcy Monday, marking the first major retail bankruptcy of the coronavirus pandemic.
The New York-based retailer had already been struggling under a heavy debt load and sales challenges, suffering from criticism that it fell out of touch with its once-loyal customers. In the past few years, the brand lost its longtime design chief, Jenna Lyons, and famed retail executive Mickey Drexler, who was CEO.
It was acquired by private equity firms TPG Capital and Leonard Green & Partners for $3 billion in 2011, one of a number of retail acquisitions in that time. Many of those deals, including Payless Shoesource and Toys R Us, have since filed for bankruptcy, as debt limited their ability to manage the retail upheaval that soon followed.
J.Crew had roughly $2.5 billion in annual sales and about $93 million in total liquidity as of February, according to Moody's. The company said Monday it has reached a deal with stakeholders to convert $1.65 billion of its debt to equity.
It has secured $400 million in financing from existing lenders Anchorage Capital Group, GSO Capital Partners and Davidson Kempner Capital Management to help fund operations through bankruptcy.
J.Crew's woes have been exacerbated by the pandemic, which has forced stores to shutter, throwing the retail industry into disarray. Retailers that were already struggling, including Neiman Marcus and J.C. Penney, are now under pressure to potentially file for bankruptcy sooner than they hoped.
Bankruptcy during the pandemic remains an uncharted course, as each state assesses whether and when to reopen stores after ordering all nonessential retail to shutter.
J.Crew said in a statement it will "continue all day-to-day operations, albeit under these extraordinary COVID-19-related circumstances." It said it will look "to reopen our stores as quickly and safely as possible."
The retailer operates 182 J.Crew retail stores, as well as 140 Madewell stores, the youthful brand it launched in 2006. J.Crew had hoped to spin off Madewell in an IPO that could have helped pay down its debt load, but faced pushback from creditors.
J.Crew said Monday that Madewell will remain part of the company.
"This agreement with our lenders represents a critical milestone in the ongoing process to transform our business with the goal of driving long-term, sustainable growth for J.Crew and further enhancing Madewell's growth momentum," CEO Jan Singer said in a statement.