J. Crew has filed for Chapter 11 bankruptcy.
The clothing company announced early on Monday that it had reached an agreement with its lenders to convert about $1.65 billion of its debt into equity.
The company has been struggling under a heavy debt load for some time. As of February, it had nearly $1.7 billion in debt.
According to The Wall Street Journal, it had planned to leverage a 2020 initial public offering of its popular Madewell brand to lessen some of its debt. Plans for the IPO were abandoned near the end of March, however, as the company failed to reach a deal with lenders.
J. Crew on Monday said it had secured $400 million in funding from its lenders to navigate its way through the restructuring process.
The retailer has had ups and downs in recent years. After going private in a leveraged buyout by TPG and Leonard Green & Partners in 2011, it experienced a bit of an identity crisis, raising prices when many shoppers were seeking more budget-conscious options. Former CEO Mickey Drexler later told The Journal that was the retailer's biggest mistake.
Drexler left his post in 2017 after 14 years as CEO. J. Crew also lost its longtime creative director Jenna Lyons and narrowly avoided bankruptcy at about the same time.
Like many other retailers, J. Crew's problems have been exacerbated by the coronavirus pandemic. It was forced to temporarily close its doors as states enacted restrictions on nonessential businesses. These stores remained closed as of Monday.
While some of its competitors are hanging by a thread — including Neiman Marcus, which is expected to file for bankruptcy protection imminently — J. Crew is the first major US retailer to announce bankruptcy during the pandemic.
"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," Jan Singer, the CEO of J. Crew Group, said in a statement on Monday.
She continued: "Throughout this process, we will continue to provide our customers with the exceptional merchandise and service they expect from us, and we will continue all day-to-day operations, albeit under these extraordinary COVID-19-related circumstances. As we look to reopen our stores as quickly and safely as possible, this comprehensive financial restructuring should enable our business and brands to thrive for years to come."
