Ann Taylor parent Ascena mulls bankruptcy filing over debt

Bloomberg

Ascena Retail Group, the owner of the Ann Taylor and Lane Bryant apparel chains, is discussing a potential bankruptcy filing with lenders after its business was thrown into disarray by the Covid-19 pandemic, according to people with knowledge of the matter.
The Chapter 11 filing, which could come as soon as July, would allow the company to keep some of its brands operating while it seeks to sell others, the people said, asking not to be identified discussing a private matter. Ascena is considering selling three of its brands
in a court-supervised sale process, including Catherines, while keeping Ann Taylor and Loft as part of the company when it emerges from bankruptcy, they said.
Ascena’s lenders are starting confidential talks on a deal that would see their holdings exchanged for a majority stake in the reorganised company, said the people.
Mahwah, New Jersey-based Ascena didn’t respond to written messages and phone calls to its public relations and investor relations representatives. The company is getting advice from restructuring lawyers at Kirkland & Ellis and investment bank Guggenheim Securities. Representatives for both advisory firms declined to comment.
Bankruptcy protection would allow the company to avoid a permanent shutdown, cut its borrowings and close weak stores to minimise costs. The situation remains fluid and plans could change, with Ascena still seeking alternative forms of financing, according to the people.
The outcome could depend on market conditions and the outlook for when stores start to re-open, the people said. This reflects the impact of the coronavirus, with sales suffering because government officials are telling shoppers to stay home and nonessential businesses to stay shut.
The majority of Ascena’s about 2,800 stores remain closed. All its shops shut in mid-March due to the outbreak and the retailer began to re-open locations in early May as state authorities lifted restrictions. Foot traffic is much lower than normal at the revived stores.
Like other retailers, the company cited a slump in sales tied to the closures. The company’s earnings and cash flow have been “significantly reduced” despite efforts to preserve liquidity, Carrie Teffner, Ascena’s interim executive chair, said.
Even before the pandemic, Ascena was experiencing financial troubles of its own making, with sales sliding and borrowings that ballooned to $1 billion.