Jewelry and accessories retailer Charming Charlie Inc. is set to exit Chapter 11 bankruptcy proceedings in a slimmed-down state after a Delaware bankruptcy judge on Tuesday approved a restructuring agreement proposed by the troubled chain.
The Houston-based merchant successfully maneuvered its way to an uncontested plan confirmation hearing after filing for bankruptcy in December seeking to implement a restructuring support agreement that drastically reduces much of its $154 million in funded prepetition debt. According to court documents, about $90 million in prepetition term-loan claims will be converted to a 25 percent equity stake in a reorganized company.
Charming Charlie entered bankruptcy on the heels of closing nearly 100 stores and announcing a strategy to revamp its business by implementing a “back-to-basics” plan that emphasizes an enhancement of the customer experience, organizational changes and growing its online retail offerings.
In a statement provided to Law360 on Tuesday, the company said it is looking forward to proceeding into the future “with a stabilized business poised for growth and 264 stores in the U.S. open and serving customers.”
“We are pleased that our pre-arranged plan has been confirmed, marking one of the final milestones in our financial restructuring and a positive step forward for Charming Charlie and our valued customers, employees and vendors,” it said.
Charming Charlie, which at one point had a retail footprint as high as nearly 400 stores, filed for Chapter 11 protection in December, citing the ongoing “retail apocalypse” facing brick-and-mortar stores in the face of increasing competition from online retailers.
The company was formed in 2004 by Charlie Chanaratsopon and grew to more than 300 locations by 2013, with another 90 since the recapitalization transactions that year. It focuses on women's jewelry and accessories, targeting customers between the ages of 35 and 55, and organizes its stores based on a 26-color palette.
According to court documents, the debtors entered into bankruptcy with less than $1 million in cash, rendering them unable to secure appropriate inventory for the 2017 winter holiday season. As part of its restructuring, the company negotiated for a new $35 million asset-based loan to replace its prepetition ABL with about $22 million outstanding and a $60 million term loan that provided a total of $20 million in new money.
The infusion of cash came at a crucial time, according to the retailer, which said that its profit margins “depend on maximizing spring 2018 holiday seasons.”
Charming Charlie is represented by Domenic E. Pacitti, Michael W. Yurkewicz and Morton Branzburg of Klehr Harrison Harvey Branzburg LLP and Joshua A. Sussberg, Christopher T. Greco, Aparna Yenamandra and James H.M. Sprayregen of Kirkland & Ellis LLP.
The case is In re: Charming Charlie Holdings Inc. et al., case number 1:17-bk-12906, in the U.S. Bankruptcy Court for the District of Delaware.
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