A Virginia bankruptcy court has given its stamp of approval to the Gymboree Corp.’s plan for getting out from under the billion dollar debt it was left with after a 2010 buyout.
The Wednesday approval of the Chapter 11 plan by Bankruptcy Court Judge Keith L. Phillips gives the popular toddlers' apparel company the go-ahead to try and balance its books with an $80 million stock offering, $273.5 million in new financing and the closure of up to one-third of its 1,300 stores nationwide.
“While there is still work ahead to complete the process, we are excited about the future opportunities for Gymboree as we continue to transform the business. The powerful combination of our great brands, a right-sized retail footprint, dedicated employees and loyal customers are now amplified by the greater financial flexibility the plan provides," Daniel Griesemer, president and CEO of Gymboree, said in a press release Thursday.
The company filed for bankruptcy protection in June, intent on restructuring about $1.1 billion in total funded debt obligations it took on during a 2010 buyout by private equity firm Bain.
Like other retailers that have filed for bankruptcy in recent months, Gymboree attributes its current financial woes to its dependency on store traffic and “underdeveloped online presence and wholesale platform.”
Under a prenegotiated plan, the company aims to recapitalize using a cash infusion of $35 million in debtor-in-possession financing from its term loan lenders, accessing up to $273.5 million from asset-backed loan facilities, rolling up prepetition borrowing debt into its DIP financing and raising $80 million in new equity through a stock offering.
The retailer is looking to close up to 450 of its 1,300 stores and focus on selling large quantities of merchandise to retailers like T.J. Maxx and Costco, improving its online and mobile shopping platform and shifting its product sourcing to lower-cost countries. The company aims to exit Chapter 11 by late September.
In its motion for approval of the plan, Gymboree said it had gotten the approval of the official creditor’s committee, the holders of 100 percent of term loan secured claims and approximately 82 percent of the holders of general unsecured claims.
The plan provides for 31 to 57 percent recovery for the term loan claimants and between 2.6 and 2.8 percent recovery for the unsecured claimants, the company said in the motion.
The final plan struck language a number of the company’s commercial landlords had claimed improperly gave the company 45 days from the plan’s effective date to decide whether or not to reject leases.
The U.S. Trustee had objected to the plan’s third-party releases, but in its approval motion, Gymboree defended them as necessary to the plan and ultimately beneficial to the company and its creditors, and the releases were unchanged in the approved plan.
The debtors are represented by James H.M. Sprayregen, Anup Sathy, Steven N. Serajeddini, Joshua A. Sussberg and Matthew C. Fagen of Kirkland & Ellis LLP and by Michael A. Condyles, Peter J. Barrett and Jeremy S. Williams of Kutak Rock LLP.
The case is In re: The Gymboree Corp., case number 3:17-bk-32986, in the U.S. Bankruptcy Court for the Eastern District of Virginia.
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