Jewellery chain Claire’s files for bankruptcy

Bloomberg

Claire’s Stores, known for tween jewellery and ear piercing, has become the latest victim of the retail apocalypse.
The company filed for bankruptcy on March 19 and said it reached an agreement with creditors including its private-equity backer, Apollo Global Management LLC, to restructure around $1.9 billion in debt. Its plan to survive rests on its reputation for trendy merchandise and a unique service that it says can’t be replicated by shopping online: ear piercing.
“To date, the company estimates that it has pierced over 100,000,000 ears worldwide,” Claire’s Chief Financial Officer Scott Huckins said in court papers as part of the Delaware Chapter 11 filing. The company began piercing ears in 1978.
But even a business model that “remains a compelling proposition over the long term” wasn’t enough to immunise the company from a decline in mall traffic, which fell around 8 percent year-over-year, Huckins said in an affidavit. The company also had too much debt, costing it $183 million a year alone in interest payments, he said.
Claire’s is the latest in a string of recent US retail bankruptcies including children’s clothing chain Gymboree Corp., athletic gear seller the Sports
Authority and toy seller Toys ‘R’ Us Inc.
Chief Executive Officer Ron Marshall has been trying to revive Claire’s North American operations, which have been under pressure as shoppers shun the malls where the company has many of its 7,500 total locations. The task was hindered by payments on its debt load and efforts to tame its liabilities, including a debt exchange in 2016 and a refinanced credit line last year, didn’t do enough to bolster cash.
Apollo, which took the company private in 2007, exchanged around $183.6 million of debt in the company as part of the 2016 transaction. As of the filing, Apollo owns 98 percent of the company’s equity, and around 28 percent of three types of the company’s debt, totalling around $48 million, according to court filings.
Claire’s agreed to a restructuring plan with a group of creditors led by Elliott Management and Monarch Alternative Capital. The ad hoc group of first lien lenders will provide the firm with $575 million of new capital, including a $250 million first lien term loan.