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A N 8 D 8 B 18 AR CE www. NYLJ.com SIN Volume 263—NO. 99 Friday, May 22, 2020 Bankruptcy Update Expert Analysis Retail Restructurings Related To COVID-19 Shutdowns

his issue of the Bankrupt- and Davidson Kempner Capital cy Update focuses on the Management. latest wave of restructur- By The debtors will seek to imple- Edward E. ings in the retail sector, Neiger ment the terms of a transaction including J. Crew, Neiman support agreement entered into MarcusT and Stage Stores, as the with approximately 71% of the industry falters under the weight company’s prepetition term loan of COVID-19 pandemic shutdowns. lenders and holders of approxi- its footprint to 181 J. Crew stores, mately 78% of their intellectual Crew Group 140 Madewell stores and 170 fac- On May 4, 2020, J. Crew Group Inc. tory stores, along with an e-com- and affiliated debtors filed petitions merce platform. In 2011, TPG Capi- J. Crew Group Inc. and for relief under Chapter 11 of the tal and Leonard Green & Partners affiliated debtors filed petitions Bankruptcy Code in the U.S. Bank- LP purchased the company for $3 for relief under Chapter 11 […] ruptcy Court for the Eastern Dis- billion. Subsequently, in 2019 J. becoming the first major trict of Virginia becoming the first Crew, contemplated a restructuring retailer to commence major retailer to commence bank- that would spin off the Madewell bankruptcy proceedings in ruptcy proceedings in the midst of brand to a separate company, the midst of the coronavirus the coronavirus pandemic. J. Crew though these plans appeared to be pandemic. Group (Bankr. E.D. Va. 20-32185). abandoned as Madewell is slated to Originally founded as a catalog remain part of the company under property company notes and their retailer, J. Crew opened its first the envisioned bankruptcy plan. financial sponsors. The transac- store in 1989 and eventually grew To fund operations under Chap- tion support agreement contem- ter 11, the debtors secured a $400 plates a financial restructuring million debtor-in-possession financ- whereby around $1.65 billion of Edward E. Neiger is a co-managing partner at ASK LLP, a national law firm focusing on bankruptcy ing facility to be provided by prepe- the company’s prepetition debt law. Marianna Udem, partner at ASK LLP, assisted tition lenders including Anchorage will be converted to equity under in drafting this column. Mr. Neiger can be reached at [email protected]. Capital Group, CSO Capital Partners a plan of reorganization. Friday, May 22, 2020

Neiman Marcus around $4 billion and transfer an Following a period of rapid expan- 87.5% equity stake in the reorga- sion, the company filed Chapter 11 On May 7, 2020, Neiman Marcus nized debtors to holders of 2019 proceedings in 1999. After emerg- Group Ltd. and affiliated debtors term loan claims. ing from bankruptcy, the company filed petitions for relief under Chap- To fund operations during Chap- acquired the Peebles and Goody’s ter 11 of the Bankruptcy Code in ter 11 the debtors secured a $675 names. Subsequently, in 2017 the the U.S. Bankruptcy Court for the million debtor-in-possession financ- company acquired Gordmans via a Southern District of Texas. Neiman ing facility from their existing term §363 sale in Gordmans’ own Chap- Marcus Group Ltd. (Bankr. S.D. Tex. loan lenders and noteholders, with ter 11 proceeding. Case No. 20-32519) $275 million made available upon The debtors implemented an The company, comprised of Nei- entry of an interim order approv- operational reorganization in late man Marcus and Bergdorf Goodman ing DIP financing on May 8, 2020. 2019 by moving to an off-price locations along with an e-commerce Access to financing was approved model. Initially, the debtors con- platform, started as a single store over objections of Marble Ridge verted 82 stores to the new model operation in Texas over a century Capital, a significant prepetition and planned to convert 220 addi- ago and grew to 67 stores across unsecured noteholder that was tional locations when the pandemic the United States. engaged in prepetition litigation forced them to shutter over 700 The bankruptcy filing was widely with the debtors and their equity stores leading to a liquidity crisis. anticipated as the retailer was bat- sponsors Ares Management and The debtors anticipate opening tered by store closures necessitat- the Canada Pension Plan Invest- 550 of their stores by May 15, 2020, ed by the coronavirus pandemic ment Board. Signaling further liti- another 67 by May 28, 2020 and the and related countermeasures. gation, Marble Ridge raised ques- remaining stores by June 4, 2020. The closures compounded pres- tions regarding propriety of certain The debtors are not seeking sures the retailer already faced as prepetition transactions involving approval of any DIP facility at this a result of the general shift away the debtors’ redesignation of their time and will seek to rely on their from brick-and-mortar to online MyTheresa e-commerce assets into prepetition secured lenders’ cash retail channels and changes in certain unrestricted subsidiaries collateral to fund their operations consumer demographics. and subsequent transfer to the under Chapter 11. The retailer entered bankruptcy Neiman Marcus parent. The debtors intend to utilize the armed with a restructuring sup- Chapter 11 proceeding to effectu- Stage Stores port agreement entered into with ate an orderly liquidation of their a group of major creditors including On May 10, 2020, Stage Stores and inventory while simultaneously holders of over 77% of the debtors’ affiliated debtors filed petitions for exploring a going concern sale for extended term loans, over 99% of relief under Chapter 11 of the Bank- all or a subset of their stores. the debtors’ second-lien notes, and ruptcy Code in the U.S. Bankruptcy over 69% of the debtors’ third-lien Court for the Southern District of notes. The restructuring support Texas. Stage Stores (Bankr. S.D. Tex. agreement sets out the key terms Case No. 20-32564). of a forthcoming plan of reorgani- Stage Stores was founded in 1988 Reprinted with permission from the May 22, 2020 edition of the NEW YORK zation, which will seek to delever- following the acquisition of the Pal- LAW JOURNAL © 2020 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382 age the debtors’ balance sheet by ais Royal and Bealls retail chains. or [email protected]. # NYLJ-05272020-449846